Transcript How to Start a Small Business

Financing for
Veterans
the SBA Way
Presented by
David Tiller-Veterans Business Development Officer
U.S. Small Business Administration TN District Office
[email protected] – 615-736-7176
Getting Started
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Why do you want to go into business?
List your reasons, e.g. freedom & dogs
What business is “right for you”?
Identify the niche your business will ‘fill’
Before you start: see the SBDC or SCORE
WHEN will you “really start” ?
PreBusiness
Checklist
Details on the business you are starting:
What services or products will I sell?
Where will I be located?
What skills and experience do I bring to
the business?
What will be my legal structure?
PreBusiness
Continued
• What will I name my business?
• What equipment or supplies will I need?
• What financing will I need?
• What are my resources?
• How will I compensate myself?
Types of
Business Structures
• Sole Proprietorship
• General Partnership
• Limited Partnership
• Corporation
• Limited Liability Company (LLC)
Financing
a Business
• Personal Savings.
• Friends and relatives.
• Banks/SBA and Credit Unions.
Borrowing
Money$$$
• Small business people have a difficult time
borrowing money. True or False?
• Banks make money by lending money. You
must show them their investment in you will pay
• Requesting a loan when you are not properly
prepared sends a signal to your lender. That
message is: HIGH RISK!
Borrowing
Money$$$
Continued
To be successful in obtaining a loan, you
must be prepared and organized. You
must know exactly how much money you
need, why you need it and how you will
pay it back. Your business plan must
convince your lender that you are a good
credit risk.
Business Plan &
Loan Proposal
• What is the opportunity your business presents?
• Business Description
• Management Profile
• Market Information
• Financial Information
What to Take
to the Bank
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Purpose of the Loan: Sources and Uses of Capital
History of the business
Financial statements for 3 years. (existing business)
Aging of accounts receivable and payable. (existing business)
Projected opening-day balance sheet. (new business)
Lease details – copy of the lease or contract for sale
Amount of investment in the business by the owner.
Projections of income, expenses and cash flow.
Signed personal financial statements.
Personal resume – bio may be best
What SBA
Looks for
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Good Character
Management Expertise and Commitment
Sufficient Funds (including loan) to operate
Feasible business plan
Adequate equity investment in the business
Sufficient collateral
Ability to repay the loan
Your Credit Report
What is considered:
1. Credit Score – 700 or above - good
2. Delinquent Accounts - Judgments
3. Payments over 30 days past due
Free Credit Report: www.annualcreditreport.com
How Your Loan
Request is Viewed
The Five “C’s” of Credit
1. Character
2. Cash Flow
3. Collateral
4. Capitalization
5. Conditions
SBA Financial
Programs
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MicroLoan Program
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Micro Loans—up to $50,000
Patriot Express Loan Initiative
SBA Community Advantage & Small Loan Advantage
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504 Loan Program
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7(a) Loan Guaranty Program
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SBAExpress Loan Program
SBA Serves
a Wide Variety of
Capital Needs
$5.0
million
$5.0 $5.5million
million
If mfg.
Growth in Business &
Changes in Capital Needs
$350,000
$50,000
Microloans
7(a)
$500,000 SBAExpress Loans
Patriot
Express
504
Loans
MICROLOANS
One Micro Lender in
TN—Pathway Lending
(formerly SE Community Capital)
Finan
MicroLoans
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Direct loans through nonprofit intermediaries
Loans of up to $50,000
Fast turnaround
Up to six years to repay
Used for —
– Machinery, equipment, fixtures
– Leasehold improvements
– Inventory
– Working capital
• Technical and management assistance available
SBAExpress
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Underwriter uses own forms -- not SBA’s
Use bank’s lending policies -- not SBA’s
Loans or revolving lines of credit to $350,000
SBA guaranty is 50%
Interest rate maximums apply
Financial Assistance
Patriot Express Loan Initiative
*Begun June 2007-Now $3.1B in loans since
*Loans to $500k—Vets, Spouses, Widows,
*Guardsmen, Reservists—interest rate adv.
*Loans under $25K-No Collateral Required
*SBA TN Success Stories: Dents-R-Us
*VOSBs are Veteran Owned Small
Businesses—Get used to acronyms
Loans for Fixed Assets
SBA 504 Program
• 504 Certified Development Co. Program
• Long-term, fixed-rate financing
• Up to $5 million in SBA-backed
debentures
• SBA debenture guaranty of up to 40% of
total loan
• Must create or retain one job for every
$50,000 of SBA debenture proceeds
Financial Assistance
Benefits of a SBA 504
Loan
• High-leveraged financing for fixed-asset
purchases
• Long-term pay back - 10 or 20 years
• Lower interest rate
Financial Assistance
To Qualify for a 504
Loan*
• Business must be operated for a profit
• Tangible net worth of less than $7.5
million
• Average net income of less than $2.5
million for the preceding two years
* Business cannot be involved in speculation
or rental real estate investment
Financial Assistance
A Typical 504
Project
• A private sector loan covering up to 50%
• A loan from the CDC covering up to 40%
(100% SBA-guaranteed debenture)
• At least 10% equity from the business
• Participating lender has first lien on
assets
Financial Assistance
7(a) Loan Guaranty
All TN SBA 7(a) Lenders are listed
at the TN District Office website:
www.sba.gov/tn
Basic 7(a) Loan Guaranty
Program
• You apply for a loan guaranty with an SBA
participating lender
• Interest rates are negotiable
Lender submits application for SBA review and
approval
• Loans are centrally processed
• After SBA approval, lender disburses funds
• You pay the bank, not the SBA
Financial Assistance
Loan Proceeds Eligible for
Most Business Uses
• 7(a) loans may be used to:
– Expand, renovate facilities
– Buy machinery, equipment, fixtures, buildings
and land for business
– Finance receivables and augment working capital
– Refinance existing debt (with compelling reason)
– Finance seasonal lines of credit
– Construct commercial buildings
– Finance direct costs on contracts
Financial Assistance
Small Loan
Advantage
New Loan Program June 2012
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Loans to $25k-prime +3.75%-no collateral
Loans $26k-50k-prime +3.75% + collateral
$26k-50k—may require UCC filing
DUNS number required-free to borrower
Loan payments come from business
checking account
• Loan is made in the business’ name
• Thank You!
David Tiller-Vets Business Dev.Officer
[email protected]
615-736-7176
»Questions