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Key Idea: Widen The Net With Friends And Family

Lupe Fraga bought his business, Tejas Office, with a loan co-signed by the previous owner and an additional loan from his wife, a former hairdresser.

Key Question:


Borrow from family and friends.  You did the best you could in your gap analysis but you're out of cash. Perhaps your financial projections were not as accurate as you had hoped, or perhaps you're business is growing slower (or faster!) than you anticipated. For whatever reason, you need money and you need it now.

What's the first source of additional funds for the growing small business which is running short of MOM?

A: Every business has a life cycle. It is conceived, embryonic, newborn, matures, ages, and dies. At a point in that cycle, a business becomes bankable. Frequently, before that point is reached, the owner runs out of MOM. The good news is that you either have a "proof of concept" of your business or you are at least closer than you were when you started.

This is the time to go to family and friends and ask to borrow money.

Give them a copy of your business plan (yes, you do need that business plan), financial projections, and a "use of proceeds" sheet that explains how much you are trying to borrow and what you intend to do with it. If you are still incurring operating losses and some of the funds will be used to close that gap, call this "working capital requirements" on your use of proceeds. Borrow the money, and expect to pay a premium interest rate for it. In the earliest stages of your business development, be very reluctant to "sell stock" in your company to friends and relatives until you have studied and are beginning to execute on the various forms of a Direct Public Offering. Even then, it is often very difficult for earlier investors to get liquid, or harvest that investment.

Also, you just have to commit yourself to paying back these loans even if your business fails. There are numerous stories throughout all our episodes where people did just that and the exercise of doing it stiffened their resolve, opened new doors, and became the groundwork for their current successes.

Think about it

If you needed to approach family and friends to augment your MOM, who would you approach? How much could you raise? How quickly could you pay it back?

Clip from: Money: All about Financing Your Business

Silicon Valley, New York City, Sydney and the World:   When you are just  starting, it is usually about your money, called MOM, an acronym for My Own Money. It is also called "skin in the game."  Very few of us have a track record and can write a business plan that is so compelling that we begin with Other People's Money (OPM).

If you are growing, there is an abundance of stagnant capital that may be looking just for you.  Qualified investors (and people who believe in you) are looking for ways to grow their money either as a loan or as an investment for equity. It will require an excellent business concept, a well-detailed business plan (your story), and real financial projections. They will also require that you understand your financials, even if they are quite modest. Those numbers are the organics of a business, the basic 1-2-3s.

Business is just a series of problem-solving exercises. That's its nature.  If you do not have the stomach for it, get a job. If you think money is going to be given to you just because you have a good idea, keep your job!

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Tejas Office

Lupe Fraga, Owner

1225 W. 20th Street
Houston, TX 77080

Visit our web site:

Office: 7138646004

Business Classification:
Office Supplies

Year Founded: 1961

Widen The Net With Friends And Family

HATTIE: Some people with an idea for a business immediately begin thinking about using OPM, other people's money. Getting startup money from a bank is hard, but not impossible. Founder of Tires Plus, Tom Gegax and his partner, Don Gullet, did it. Where did the money come from to start the business?

TOM GEGAX: Well, we both worked for Shell Oil Company, so what we did was each take money from our profit sharing fund that, when we left them, came to us.

So I remember we had, it was $90,000 it took to get in business.

So we had a $60,000 loan and $30,000 was between us. And I had like $15,500 and he had $14,500, something like that.

Getting a loan was the toughest thing because we went to like 10 banks and we kept getting turned down. And I think bank number 9 when they turned us down, I said, 'Why?' They said, 'You don't have experience at running a business.' And I really blew a gasket on that. After such frustration, I said, "Well why do they need you? Why don't they just put the stuff in the computer and one of the dings is, 'If you haven't run a business before, don't even have us come in.'"

HATTIE: You're out.

TOM: Yeah. Just say no matter, how potentially qualified you are, you won't get it. I said just have this all be computerized, they really don't need you.

HATTIE: Well, where did you get the $60,000 if all the banks said no?

TOM: Well finally found one that would. We found one that would through an attorney that we were doing business -- some other attorney in the law firm was a kind of finance attorney. He was on the board of the bank, and if he believed in you -- which he believed in us, then he'd put in a good word to the board. And we got it that way.

HATTIE: So it was a character reference.

TOM: Yes.

HATTIE: An insider character reference.

TOM: Insider character reference, that's the truth.

HATTIE: You'll be happy to know that in 2000 when Tires Plus was generating $200 million in annual sales, Tom and Don sold to an international conglomerate for double digit millions. (Voiceover)

Meet Pamela Rodgers
Pamela Rodgers borrowed money from her parents for the down payment on a GM dealership in Woodhaven, Michigan. That's other peoples money. GM has a program that allows dealers to buy in over time. So Pam put together two sources to make it happen and on top of that she was willing to invest in a location that had become known as an ugly duckling.

Editor's Note: This is a strange mixture of OPM and MOM. If Pamela did not pay the loan back, but gave her folks a piece of the company, it would become OPM. Even though it was not necessarily secured in a traditional sense with her own money, it was secured by her reputation and relations with her parents.

Meet Lupe Fraga
HATTIE: (Voiceover) A business for sale by an owner who will carry the financing was the perfect opportunity for Lupe Fraga.

LUPE: We make your business day easier.

HATTIE: (Voiceover) Is the slogan of Lupe's company, Tejas Office Products, which has been operating in Houston since 1961.

LUPE: I was practicing as an accountant and Jim Kindig who had an office supply company, was servicing this company and he came to me and he asked me if I was interested in going into the office supply business. So, being single and just having returned from the United States Army, serving in France, I said, 'Why not?' So I took the opportunity. He loaned me some money, co-signed the note at the bank. Had one delivery truck and one secretary and that started me out.

HATTIE: (Voiceover) Lupe sales have increased 40% over last year bringing the total to 7.5 million for the last 12 months. Many business owners look for and win venture capital or private placements.

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