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Slides for a presentation about applying to the NC Rural Center\'s Microenterprise Loan Program. Basics of what lenders look for.
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Getting to Yes:Unlocking Funds For Your Small Business
Business Development & Entrepreneurship Center
www.pccbusiness.com
1-26-2011
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Let’s start by getting this out of the way!
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Grants!
¨ Everybody wants one!¨ Extremely rare for most industries.¨ Those that exist don’t cover all costs.¨ Don’t get scammed!
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Getting To Yes
¨ So I can’t get a grant, where are the loans?Banks/Credit UnionsSelf-Help Credit Union
• www.self-help.orgKerr Tar COG
• www.kerrtarcog.orgNC Microenterprise Loan ProgramCommunity Programs
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Getting To Yes
¨ Can’t I get an SBA loan?Not from the SBA, they’re not a direct lender.Plan to work with a bank.Several programs are available. If you qualify.
7a504Microloans
Additional costs are involved.
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Getting to Yes
¨ Start with “Why” you want funding.Start up costs Expanding an existing businessShort term capital needsLong term investment (purchase)
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Getting To Yes
¨ To start/expand your businesses:1. Develop the concept/idea
2. Write the business plan
3. Locate help/technical assistance (TA)
4. Research loan options
5. Check your credit
6. Prepare your application
7. Follow up
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Getting To Yes
¨ A good business concept will:Be clear and consumer friendlyIdentify a niche consumer (market)Be specific about the consumers your business
plans to serveExplain how your service is tailored to your
consumersExplain why customers will buy from you
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Getting To Yes
¨ Your written business plan is a “road map”:Keep it simple Keep the information consistentKeep it current
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Getting To Yes
¨ A business plan written correctly:Contains the business financials Sells the business in a positive mannerIllustrates why you will be successful.Showcases your knowledge as its owner or
proposed owner
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Getting to Yes¨ You don’t have to do this alone. Get some help!
Business Development & Entrepreneurship Center• www.pccbusiness.com
Small Business and Technology Dev. Center• http://www.sbtdc.org/
North Carolina Institute of Minority Economic Development & Women’s Business Center• www.ncimed.com
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Getting to Yes
¨ Preparing a loan request:Have a clear use of funds; know/understand
exactly what money will be used for. Verify this information with written estimates
and quotes, whenever possible.Information should be consistent from
application to business plan.
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Getting to Yes
¨ Preparing a loan request:Know loan requirementsInquire about loan terms upfront Know the lenders “lending” focus and
limitations
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Getting to Yes
¨ What does the lender look at?CreditCash flowCapacityCollateralCharacter
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Getting To Yes
¨ Credit ( Do you pay people back?):Credit ScoreCredit Report
HistoryPublic recordsOutstanding balancesAmount and types of creditRatios
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Getting To Yes
¨ Know current credit history:Address blemishes before applying for funding
Incorrect informationLiens and judgmentsCollections and charge offsLate payments
If needed contact:
Consumer Credit Counseling
1-877-877-1995
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Getting To Yes
¨ Credit reporting agencies:Equifax Experian Trans Union
¨ Get a free copy of your credit reports atwww.annualcreditreport.com
¨ Get a free credit score at www.creditkarma.com
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Getting To Yes
¨ Cash Flow:Refers to moving money into and out of a
business.Will there be enough cash flow to pay the loan?Should be included in the business planAlso demonstrated with profit/loss statements
and balance sheets
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Getting To Yes
¨ Capacity (Can you pay us back?):The ability to repay debt both present and
future, as well as The ability to manage a business as its ownerSecondary sources of repayment
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Getting To Yes
¨ Capacity Counts:Refer to the business plan as evidence of
capacity.Know your market!Demonstrate that you can compete.
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Getting To Yes
¨ Capacity vs. Challenges:Don’t ignore challenges in your plan.Challenges impact your bottom line and if not
addressed can destroy your business.Once you have acknowledged your challenges
plan to overcome them.
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Getting To Yes
¨ Collateral (What if you don’t pay us back?):Stuff they can take if you don’t pay.Almost always required as security for the loanOften viewed as a secondary source of
repayment. Can be inventory, equipment, vehicles or real
estate.Lender prefer collateral that can be easily
liquidated.
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Getting to Yes
¨ Collateral vs. Risk:Lenders want to minimize their riskTo offset their risk, lenders look to collateral
first and foremostCollateral guides the level of riskCharacter can also impact risk
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Getting To Yes
¨ Lack of Collateral?Play up strengths, such as experience and
training/certifications or strong competitive advantage
Consider having a cosignor
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Getting To Yes
¨ Character (Can we trust you?):Most subjectiveDoes applicant show themselves to be
trustworthy? What is the “financial reputation”?Are you honest and consistent in the business
plan and application?Do you have the right attitude for your
industry?
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Getting To Yes
¨ Character is honesty It is also the best policy and the easiest
to remember .Resist overstating facts, this can result in your
application being declined.Do what you say you will do!
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Getting To Yes
¨ Character is accuracy:Verify as much information as possible.Give sources if applicable If you don’t know something state that you
don’t know. Do your homework.
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Getting To Yes
¨ Character is being prepared to talk :Lenders ask questionsTry to anticipate questions ahead of timeTry to establish a relationship with the lender Do not “Beat up the Lender”
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¨ Finally!
Create a good track record for future funding needs.
OR
If you are declined understand why and ask for other references or assistance.
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Getting To Yes
Questions?