• Share
  • Email
  • Embed
  • Like
  • Save
  • Private Content
Quickstart Financing 4 Rev4

Quickstart Financing 4 Rev4



Overview of criteria for loan success and collateral requirements

Overview of criteria for loan success and collateral requirements



Total Views
Views on SlideShare
Embed Views



0 Embeds 0

No embeds


Upload Details

Uploaded via as Microsoft PowerPoint

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
Post Comment
Edit your comment

    Quickstart Financing 4 Rev4 Quickstart Financing 4 Rev4 Presentation Transcript

    • O r a n g e C o u n t y
      Quick Start Financing (4)
      Collateral Evaluation
      Startups & Franchise Considerations
      January 19, 2010
    • Presentation By
      John P. Lafare
      Management Counselor
      SCORE – Orange County Chapter
    • How do I get a loan?
      Prepared by John Lafare
    • Alternatively, the five “C”s
    • Is collateral always required?
      Requirements vary by lender, type of loan
      Some programs do not require collateral
      Higher risk means more collateral
      Strong business plans and solid financial projections can reduce collateral needs
      Borrower needs to provide reasonable reassurance of repayment from earnings
      Collateral not a substitute for repayment ability
    • What are the lender’s collateral requirements?
      Often the last hurdle to clear
      If no collateral, may need a co-signer with collateral to pledge
      Any asset of value can be pledged
      Up to or above 100% of loan principal amount
      Actual percentage a function of:
      Risk on your loan
      Accumulation of institutional risk
    • What are the SBA requirements?
    • What are the SBA personal guarantee expectations?
      For all SBA loans, personal guarantees are required for:
      Every owner of 20% or more of the business
      Other individuals in key management positions
      Whether a guarantee will be secured by personal assets is based on:
      The value of the assets already pledged
      The value of the assets personally owned relative to the amount borrowed
    • When is an owner-occupied residence required as collateral?
    • Which assets can be pledged?
    • Factoring of receivables
      Can be used to convert credit sales for immediate cash flow
      Outright sale of receivables to a factor:
      Receivables sold at a discount to book value
      May charge interest on the balance until collected
      Often withhold some money to establish a reserve fund
      Value assigned to receivables:
      Depends on the age of the receivables
      Older than 90 days typically not financed
    • How are collateral assets valued?
    • Collateral valuation examples
    • Who is lending?(Source: FY10 SBA Rankings Through 12/09)
      SBA loans by
      top 10 lenders
      up 105% YOY
    • Challenges for start-up businesses
    • Franchises and collateral
      Systems listed in The Franchise Registry:
      Eligible for expedited loan processing
      Control provisions acceptable to SBA / lenders
      For those not on the list, collateralization may be limited by franchisor requirements
      Lenders also prefer franchisees who are buying rather than leasing a store and land
      Currently, banks may not only require more collateral but may also reduce valuations