In 1986, my soon-to-be business partner and I discovered a remarkable treasure: eight million antique mother-of-pearl buttons, the remaining inventories of now-closed button factories that operated on the banks of the Missouri River a century ago. A few months later, we uncovered an equally remarkable treasure: a $225,000 bank loan that would allow us to buy the buttons, launch a jewelry business, and fulfill our long-standing dream of becoming entrepreneurs.

Many aspiring small-business owners, of course, jump at any cash that is offered. The prospect of raising money looms so large, it appears to be a greater obstacle to success than hiring staff, making products, or finding customers. We were no exception. After raising $75,000 from family and friends, we eagerly pursued 10 banks for the balance of the $300,000 we needed to buy the buttons. When the loan came through, the dream had begun -- but so had the nightmare.

Indeed, the financing we believed would enable us to launch our business, Eastwind Trading Co., actually wound up killing the company, driving both my partner and me into personal bankruptcy. From the perspective of 10 years, it is easy to identify the root of the problem: the terms of the loan were so burdensome that we were doomed from the start.

Bad Loan, Insightful Lesson
Our experience serves as a lesson for entrepreneurs smitten with those alluring words from respectable commercial lenders: "Your loan has been approved." Relieved not to have to deal with such netherworld alternative financing techniques as credit card debt, some aspiring owners don't put enough emotional distance between a bank's money and their needs. They don't analyze whether a bank loan is right for them. What follows is a look at our story, which I offer with the hope that your story will have a happier ending.

Let's begin with what we did right. As young women in our early 30s, we carefully charted a plan for building a business while keeping roofs over our heads. I put up most of the initial start-up funding and kept my day job as a marketing employee for what is now Sprint, and my partner shut down her advertising agency to contribute sweat equity. Our idea for upscale jewelry crafted from the buttons was on target. The first year, we easily secured about $150,000 in orders from such stores as Nordstrom and Fortunoff.