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