Financing

 

When considering any kind of financing request or loan application, the better route is to make sure you have all of your paperwork ready (business plan, financial projections, specific amount needed, specific uses of funds, understanding your personal credit situation, etc) BEFORE you apply.  This is especially important if you are starting your business OR have an existing business that has not utilized traditional financing previously.

 

·         Based on experience, it is usually better to provide the info to lenders then let them decide if they are interested

 

·         If the lender is indeed interested, the lender will try to find a way to do the deal - which may include some guarantee program.

 

Before considering financing:

·         Determine EXACTLY why you need the money

·         Determine your share; down payment

·         Where is repayment coming from?

·         Determine what collateral is AVAILABLE

·         Prepare yourself;  Know your business

·         Think about talking to an SBDC Counselor first

 

Sources of financing:

 

• Personal Investment
• Commercial Banks, Credit Unions
• Financial Services Companies
• Specialty Finance Companies
• Seller Financing
• Venture Capitalists (become part owners of the business)
• Federal Government
• State Government
• Local Governments

 

We suggest that you first talk with the bank where you have business and/or personal bank accounts.

 

 

SBA loan guarantee programs

 

·         The web link for SBA financing info is http://www.sba.gov/financialassistance/ 

 

·         Just to clarify, the SBA does NOT provide loan monies directly to borrowers (except after natural disasters).   The SBA provides LOAN GUARANTEES to lenders.

 

·         ALL standard SBA loan products are handled thru lenders - both traditional (banks, finance companies, etc) and non-traditional (online, etc).  Most traditional lenders participate in the SBA loan guaranty program. 

 

 

Seller Financing – another option!

·         With “traditional” lenders looking harder at deals, this has become more of an option for willing business sellers

·         Sometimes the buyer is willing to pay a higher price if seller finances all or most of the transaction

·         Often used for all or part of financing if “all income” cannot be verified

·         Repayment terms can get creative and/or flexible

·         May require more “down payment”

·         Possible tax advantages to the seller

 

What info do you need?   Depends, but normally:

·         2 years business tax returns

·         Interim/YTD business revenue/expense

·         Info about potential collateral

·         Equipment purchase orders

·         2 years personal tax returns

·         Completed Personal Financial Stmt

·         Business plan with cash flow projections