My Biggest Mistake: Thinking banks would finance my start-up

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Consultants, self-help gurus and moms agree: Mistakes are how we learn. Small-business owners tell us their biggest errors. Here is this week’s:

Business owner: Margie Mullen, Los Angeles

Companies: Mullen Advisory and KidExerciser

The mistake: Assuming that as a successful financial advisor with a very high credit score, I would not have trouble obtaining financing for my new business: making and selling a bike stand that requires kids to pedal their bikes in order to get the TV to work.

Background: When my son was 6 years old, my spouse said, “I wish there were a way we could get him to exercise in order to watch TV.” Our product, 123GoTV, is a bike trainer stand that allows the child’s own bike to be pedaled in a stationary position. Hook it up to the TV, and if the pedals aren’t moving, the video feed won’t come through. It is expected to hit the market sometime next month.

What I did: I really thought that as a successful business owner with a 25-year track record, having business credit that I have successfully used, having a very high FICO -- I just assumed I wouldn’t have the same problems that other start-up businesses have. But I was mistaken. The banks that finance the Small Business Administration loans said that doesn’t matter. What matters is: Do you have experience in this business that you’re starting, and is it at least five years’ experience?

What I learned: I had to go the other route, which was tapping mainly relatives. People who want to start a business should know that they’re going to end up having to use their own money, their already existing credit, the equity in their house, or borrow from well-meaning friends and relatives. And they may have to issue shares to give a part of the business to these people who are willing to lend them the money.

Have you made a mistake from which other small-business owners can learn? Please tell us about it at business@latimes.com.
-- Sharon Bernstein

Twitter: @sharonbernstein