Startups need to get their finances in order early on

Enlarge Photo

From left to right, Kelly Navagh and Adam Desmond of First Niagara Bank and Brian Kern and Doug Muth of Lumsden McCormick speak during Wednesday’s “Lunch with Lumsden” event at d!g in the Thomas R. Beecher Jr. Innovation Center.

15 photos

Home of the Day

Sponsor Listing

Dan Miner

Reporter- Buffalo Business First

Email  |  Twitter  |  LinkedIn  |  Google+

A start-up company isn't likely to get attention from a bank for traditional financing until two to three years after its founding, and even then it must be showing significant signs of maturation.

But entrepreneurs shouldn't wait that long to begin keeping accurate books, preferably with the guidance of an accountant. And they should have an attorney review any significant sums of alternative financing, such as venture capital or friends and family, to be sure the terms are fair.

Those were a few bits of wisdom during a lunchtime panel Nov. 12 at d!g in the Thomas R. Beecher Jr. Innovation Center. The event, titled "The Business of Innovation," was part of a lunchtime series sponsored by Lumsden & McCormick accounting firm.

The panel included Brian Kern and Doug Muth, both CPAs for Lumsden & McCormick, along with Adam Desmond and Kelly Navagh from First Niagara Bank.

Desmond said business owners occasionally run into trouble with friends and family financing when it's time for a bank loan. The debt from mothers, fathers, aunts and uncles must be subordinated to the bank's debt — which sometimes runs counter to their expectations.

Start-up companies can get bank loans before they're out of early stages, but typically they need either a Small Business Association grant that limits the bank's risk or personal collateral, panel members said. The latter can be hard to come by when most entrepreneurs already have much of their savings invested into their young companies.

The next "Lunch on Lumsden" event will take place from noon to 1 p.m. on Dec. 10 and cover tax incentives available for local businesses.

Dan Miner is Business First's enterprise reporter. He also covers education and public companies.