Post on 26-Dec-2015
Small Business Loans
Kim Pope, Vice President, Regional ManagerBusiness Banking Group
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The Foundations of a Business
What type of legal entity will you be?
How many owners involved?
Do you have a building? Will real estate be involved?
Identify your market, mission statement
Register with the state and professional board(s) if applicable
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Key to a Successful Start-up
Raising Capital - basic of all business activities
Can you handle a few bad months to start?
Develop a banking relationship
Develop a financial reporting system (balance sheet & P&L)
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Business Financing Options
Personal savings
Personal borrowing
Friends & family
Credit cards
Business borrowing
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Personal Savings
Personal Savings - primary source of capital for new businesses
Look to your assets for opportunity• 401K• whole life insurance• etc.
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Borrow Against Your Home
Refinance your existing mortgage with a new one
Take out a line of credit against equity in your home
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Friends and Family
Get an agreement in writing
Emphasize debt (loan) rather than equity (ownership)
Pay back nominal interest at regular intervals (quarterly)
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Credit Cards
Quick and easy
Keep borrowings separate from personal use (separate card for the business)
Can be inexpensive and flexible when considering monthly payments
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Business Borrowing
Do your homework – be prepared!
Know your business: balance sheet income statement (profit & loss) seasonality
We want to understand your business
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Applying For a Business LoanGeneral Information
Business name, legal structure of business, and names and SS# of principals
Purpose of loan - what loan is being used for and why it is needed
Amount required - the amount you need to achieve your purpose
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Applying For a Business LoanManagement Profile
Short statement on each principal in your business
Provide background
Education
Experience, skills and accomplishments
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Applying For a Business LoanMarket Information
Clearly define your company’s market
Identify your competition and explain how your business will compete in the marketplace
Profile your customers and explain how your business will satisfy their needs
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Applying For a Business LoanFinancial Statements
Personal tax returns (2 years)
Business tax returns (2 years)
Interim financial statements (as needed)• balance sheet• income statement
Personal Financial Statements – PFS (as needed)
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How Will Your Loan Be Evaluated?
The Five “C’s” of Credit
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Five “C’s” of Credit
Character (credit history):
Will look at personal and business credit report to look at repayment trends
• Do you pay your bills?• Do you pay your bills on time?• Are there explanations for any blemishes?
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Five “C’s” of Credit
Cash Flow:
Historical and projected cash flow analysis to determine if you will be able to repay loan and have enough money to run the business
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Five “C’s” of Credit
Collateral (an asset, something you own):
A lender can claim to satisfy a loan in the event the loan is not repaid according to required terms
Assets purchased with loan proceeds may serve as collateral
If business does not have enough collateral - the bank will look to personal assets
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Five “C’s” of Credit
Capitalization (basic resources of the company):
Owner Equity
Retained Earnings
Fixed Assets
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Five “C’s” of Credit
Conditions (factors that affect the success of the company):
Government regulations
Competition
Industry Trends
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Make it Happen!
Resources are available to help you:
Professional service partners:• your local banker• your accountant/CPA
Business counseling organizations:• SBA• Small Business Development Center• Center for Women’s Business Advancement
• SCORE