Business Loan Proposals

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Preparing to present a small business loan proposal to your lender

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  • Business Loan Proposals

    1. 1. Preparing to Approach Your Lender Mission Community Services Corp. 1/31/2008 A Zeller
    2. 2. “ What we’ve got here is a failure to communicate!” Cool Hand Luke 1/31/2008 A Zeller Though beaten, Luke refuses to stay down!
    3. 3. You Speak Different Languages! <ul><li>The Entrepreneur </li></ul><ul><li>Risk Taker </li></ul><ul><li>Looks to the Future </li></ul><ul><li>Numbers = Sales & Market Share </li></ul><ul><li>Product and Sales Oriented </li></ul><ul><li>The Lender </li></ul><ul><li>Risk Averse </li></ul><ul><li>Looks to the Past </li></ul><ul><li>Numbers = Balance Sheet and P&L </li></ul><ul><li>Performance to Standards </li></ul>1/31/2008 A Zeller
    4. 4. Don’t Forget the Golden Rule <ul><li>“ He who has the GOLD </li></ul><ul><li>makes the RULES!” </li></ul>1/31/2008 A Zeller
    5. 5. Debt vs Equity Financing <ul><li>DEBT </li></ul><ul><li>A loan </li></ul><ul><li>You are charged fees/interest </li></ul><ul><li>EQUITY </li></ul><ul><li>A piece of your business </li></ul><ul><li>Purchase or investment in success of your business </li></ul>1/31/2008 A Zeller
    6. 6. What Are Your Choices? <ul><li>PERSONAL ASSETS </li></ul><ul><li>Savings </li></ul><ul><li>Mom & Dad, other family </li></ul><ul><li>Friends </li></ul><ul><li>Credit Cards </li></ul><ul><li>Home Equity Loans </li></ul>1/31/2008 A Zeller
    7. 7. What Are Your Choices? <ul><li>MICROLOANS ($500 TO $35,000) </li></ul><ul><li>SLO Economic Vitality Corp. </li></ul><ul><li>Some Banks & Credit Unions </li></ul><ul><li>SBA </li></ul><ul><li>Credit Cards </li></ul><ul><li>Home Equity Loans </li></ul>1/31/2008 A Zeller
    8. 8. What Are Your Choices? <ul><li>SBA Loan Programs Snapshot </li></ul><ul><li>Remember – SBA is not a direct lender. </li></ul><ul><li>What they do is remove some of the risk for your bank/lender. </li></ul><ul><li>Basic 7(a) Loan Guaranty </li></ul><ul><li>504 Loan Program </li></ul><ul><li>Loan Prequalification </li></ul>1/31/2008 A Zeller
    9. 9. What Are Your Choices? <ul><li>Other Sources to Consider </li></ul><ul><li>Lines of Credit </li></ul><ul><li>State Programs </li></ul><ul><li>City/County or other Programs </li></ul><ul><li>Savings Accounts </li></ul><ul><li>Insurance Policies </li></ul><ul><li>Refinancing of Assets </li></ul><ul><li>Sale of Assets </li></ul><ul><li>Venture Capital </li></ul><ul><li>Angel Capital </li></ul>1/31/2008 A Zeller
    10. 10. The Loan Application Process <ul><li>Chose your lender </li></ul><ul><li>Get Acquainted – present your concept/needs </li></ul><ul><li>Prepare a formal written proposal & complete lender’s application </li></ul><ul><li>Discuss with lender – address concerns </li></ul><ul><li>Timeline can be instant to months, depends on complexity of the loan </li></ul><ul><li>Lender takes your proposal before loan committee </li></ul><ul><li>Decision is made </li></ul>1/31/2008 A Zeller
    11. 11. Parts of a Loan Proposal <ul><li>Summary </li></ul><ul><li>Top Management Profiles </li></ul><ul><li>Business Description </li></ul><ul><li>Projections </li></ul><ul><li>Financial Statements </li></ul><ul><li>Purpose – Use of the Loan </li></ul><ul><li>Ask for Precise Amount </li></ul><ul><li>Repayment Plan </li></ul>1/31/2008 A Zeller
    12. 12. The Seven C’s of Lender Reviews <ul><li>Credit </li></ul><ul><li>Capacity </li></ul><ul><li>Capital </li></ul><ul><li>Collateral </li></ul><ul><li>Character </li></ul><ul><li>Conditions </li></ul><ul><li>Commitment </li></ul>1/31/2008 A Zeller
    13. 13. Terms <ul><li>Type/Structure of the loan </li></ul><ul><li>Collateral </li></ul><ul><li>Term of loan (time frame) </li></ul><ul><li>Repayment schedule </li></ul><ul><li>Interest rate </li></ul>1/31/2008 A Zeller
    14. 14. SOURCE AND USE 1/31/2008 A Zeller SOURCE - Amount You Need Amount Requested $   Owner's Investment $   TOTAL USE OF FUNDS Working Capital $   Equipment & Machinery $   Furniture & Fixtures $   Commercial Real Estate $   Leasehold Improvements $   Debt Restructuring $     TOTAL $  
    15. 15. Financial Statements <ul><li>BALANCE SHEET </li></ul><ul><li>How well is the company managing its financial resources </li></ul><ul><li>Snapshot of financial condition at an instant in time </li></ul><ul><li>Good match of source and uses of funds </li></ul><ul><li>The business report card! </li></ul><ul><li>PROFIT & LOSS STATEMENT </li></ul><ul><li>How well the company buys and sells inventory or services to make a profit </li></ul><ul><li>Reports financial results over a period of time </li></ul><ul><li>Match of revenues and expenses </li></ul>1/31/2008 A Zeller
    16. 16. Operating Cycle <ul><li>The length of time, measured in days, cash remains in operations before it returns with a profit. </li></ul><ul><li>Days Receivable (A/R) </li></ul><ul><li>+ Days Inventory (Inv.) </li></ul><ul><li>- Days Payable (A/P) </li></ul><ul><li>- Days Accrual (Acc.) </li></ul><ul><li>= Operating Cycle </li></ul>1/31/2008 A Zeller
    17. 17. Ratios & Liquidity <ul><li>Liquidity (Current & Quick/Acid Test) </li></ul><ul><li>Asset Management </li></ul><ul><li>Profitability </li></ul><ul><li>Market Value </li></ul><ul><li>SLO SCORE Expert - Jim Kiraly! </li></ul>1/31/2008 A Zeller
    18. 18. Negotiation <ul><li>Power in Negotiation </li></ul><ul><li>The Negotiation Process </li></ul><ul><li>What’s in it for the Lender?? </li></ul>1/31/2008 A Zeller
    19. 19. Questions & Answers <ul><li>Andrea Zeller </li></ul><ul><li>Mission Community Services Corp. @ Creekside Career Center </li></ul><ul><li>4111 Broad St., Suite A4 </li></ul><ul><li>San Luis Obispo, CA 93401 </li></ul><ul><li>Tel. 805 595-1357 </li></ul><ul><li>Email: [email_address] </li></ul><ul><li>Website: www.MCSCorp.org </li></ul>1/31/2008 A Zeller
    20. 20. 1/31/2008 A Zeller Please complete your workshop evaluation before you go!

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