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Small Business Loans

Small Business Loans. Kim Pope, Vice President, Regional Manager Business Banking Group. 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

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Small Business Loans

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  1. Small Business Loans • Kim Pope, Vice President, Regional Manager • Business Banking Group

  2. 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

  3. 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)

  4. Business Financing Options • Personal savings • Personal borrowing • Friends & family • Credit cards • Business borrowing

  5. Personal Savings • Personal Savings - primary source of capital for new businesses • Look to your assets for opportunity • 401K • whole life insurance • etc.

  6. Borrow Against Your Home • Refinance your existing mortgage with a new one • Take out a line of credit against equity in your home

  7. Friends and Family • Get an agreement in writing • Emphasize debt (loan) rather than equity (ownership) • Pay back nominal interest at regular intervals (quarterly)

  8. 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

  9. Business Borrowing • Do your homework – be prepared! • Know your business: • balance sheet • income statement (profit & loss) • seasonality • We want to understand your business

  10. 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

  11. Applying For a Business LoanManagement Profile • Short statement on each principal in your business • Provide background • Education • Experience, skills and accomplishments

  12. 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

  13. 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)

  14. How Will Your Loan Be Evaluated? The Five “C’s” of Credit

  15. 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?

  16. 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

  17. 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

  18. Five “C’s” of Credit • Capitalization(basic resources of the company): • Owner Equity • Retained Earnings • Fixed Assets

  19. Five “C’s” of Credit • Conditions (factors that affect the success of the company): • Government regulations • Competition • Industry Trends

  20. 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

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