When (profitable) small businesses can’t raise money… kittens cry.
In 11 months, BootstrapSolar has developed a product, brought it to market, and has almost sold out of the first production run. It is profitable and only slightly in debt, which is a rare thing for a business less than a year old. We have an improved version of the kit that’s almost ready to go into production, and a 2nd product line is in the works.
Except, there’s one minor issue. The battery manufacturer has decided not to accept orders of less than 500 pieces, which increases the cost of this next production run by $4k. That’s an additional $4k that we don’t have.
So, what do I do? I do what small businesses ought to be able to do: get a loan. So I walk in to Wells Fargo (where my business account is) and ask about loans. I even show the banker the power pack, who seems genuinely impressed. He types into the terminal to get a loan application going, and the terminal responds: “Rejected. You haven’t been in business long enough.” They require a business to have been operating for 4 years to open a line of credit. Well, geez, how do you expect a business to stick around ‘til Year Four if you don’t help it in Year Two?
If a profitable business can’t borrow money to make more of a product that’s proven to sell, what does it take?
We need to fix unemployment, and small businesses like BootstrapSolar are part of the solution. I don’t make any money from BootstrapSolar, so 80% of the money that comes in goes back out to US-based manufacturers, vendors and services (the other 20% goes out of the country). Approximately $15 out of each kit goes to a local small business that’s helping with laser cutting and kitting, and of that, about $9 goes to the employees, Nick and Jon (the other $6 goes to taxes, expenses, and benefits). Nick and Jon use that money to pay rent, buy food, and maybe occasionally go out. If you want a trickle-down economy, small businesses are where the trickling down actually happens.
There is a systemic problem with how funds in our society get distributed and allocated. Facebook raised $15,000,000,000 in their IPO. There are small businesses that could use investments of $50,000. Heck, BootstrapSolar just needs $5,000 to keep going. Which is better for society: Fattening one Facebook, or supporting 300,000 small businesses (or keeping 3,000,000 BootstrapSolars afloat)?