Financing yoursmallbusiness lb-class

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There are different sources for financing representing various opportunities. This seminar will tell you about some of these opportunities and the best method for increasing your chance of securing a loan. The program will also bring clarity to what financing opportunities the Federal Government offers through the Small Business Administration. Co-Sponsored with the High Point and Greensboro Public Libraries. Facilitated by Chisa D. Pennix-Brown, MBA of Lady Bizness, Inc.

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Financing yoursmallbusiness lb-class

  1. 1. Welcome to Financing Your Small Business • Please Silence or Mute Cell Phones • Please Ask Questions • Please complete registration forms • Introduce Yourself Bizness Branding Academy Powered by Lady Bizness
  2. 2. Financing Your Small Business • Types of Funding • General Requirements • Sources of Funding Bizness Branding Academy Powered by Lady Bizness
  3. 3. Types of Funding • Loans – Funds loaned to the business typically repaid in equal monthly payments • Personal Loans • Operations-related Financing • Business Loans Bizness Branding Academy Powered by Lady Bizness
  4. 4. Personal Loans • Loan obtained by an individual from a bank and paid back in equal, monthly installments – Secured (collateral guarantees repayment) – Unsecured (signature loan) • Loans from life insurance (up to 95% of cash value of policy) • Credit Cards • Second Mortgages (Home Equity Credit - up to 80% of equity built up in property) • Friends and Relatives Bizness Branding Academy Powered by Lady Bizness
  5. 5. Operations-Related Financing • Supplier Credit • Customer Credit (customer deposits) • Leasing • Accounts Receivables Financing • Factoring • Asset-Based Financing Bizness Branding Academy Powered by Lady Bizness
  6. 6. Business Loans • Term Loans – Installment loans with equal, monthly payments • Lines of Credit – Short-term funds; seasonal businesses • Government Assisted Loans – Small Business Administration (SBA) – State and Local Agencies Bizness Branding Academy Powered by Lady Bizness
  7. 7. Choosing a Banker • Size of the bank • Familiarity and desire to work with small businesses • How the bank will react to your problems? • Is the bank helpful? • Has the bank some special experience in your industry? • Is there good personal chemistry? Bizness Branding Academy Powered by Lady Bizness
  8. 8. NC BANKS KEY Allegacy Federal Credit Union Coastal FCU * 7 (a) Lenders Alliance Bank & Trust Fidelity Bank (GA) # * SBA Ezpress BB & T * # Mechanics & Farmers Bank #Preferred Lenders Bank of America * # RBC Bank * # Bank of North Carolina* # Self Help Credit Union * Bank of the Carolinas * Suntrust * Bank of Oakridge * Vantage South * Carolina Premier * Wells Fargo * # NC Banks Bizness Branding Academy Powered by Lady Bizness
  9. 9. What does the Lender Look For? Capital • How much of your own money do you have invested in the business (30% of total project cost is a good rule of thumb for most banks) Collateral • What is the fair market value of the security that you are offering to guarantee repayment of the loan? Bizness Branding Academy Powered by Lady Bizness
  10. 10. Capital • Capacity to Repay – How much profit will your company generate? – Will your cash flow provide you with enough money on a regular basis to cover the loan repayment? • Conditions – What are the economic, demographic, and regulatory trends which impact your business? – What terms can be negotiated to allow the bank to evaluate the risk/reward consideration? Bizness Branding Academy Powered by Lady Bizness
  11. 11. Collateral General valuation estimates for assets: – Certificates of Deposit 100% – Real Estate 75-80% – Stock (publicly traded) 75% – Vehicles 75-85% – Equipment 50-75% – Accounts Receivable 50-75% – Inventory 0-50% Bizness Branding Academy Powered by Lady Bizness
  12. 12. InternalExternal Helpful Harmful STRENGTHS OPPORTUNITIES WEAKNESSES THREATS SWOT Analysis Bizness Branding Academy Powered by Lady Bizness
  13. 13. Personal Character • What is your track record - personal and professional - in managing finances and paying credit obligations? • Who are the key managers in your business; do they have the experience and the ability to run this business successfully? Bizness Branding Academy Powered by Lady Bizness
  14. 14. What to put in a Loan Proposal? • What Bankers Look at in a Loan Proposal: – Equity • Lenders expect borrowers to have already invested from 10 to 30% of the loan amount; if your business has existed for less than 3 years, plan for 30%. – Debt-to-Worth Ratio • Most critical on the day after loan approval and at the end of the first year of operations; the lower the better (i.e. - more worth/equity than debt) Bizness Branding Academy Powered by Lady Bizness
  15. 15. General Requirements • Ability to Carry Debt Service – Your cash flow projections typically reflect this • Secondary Sources of Repayment – Important especially in a start-up business (e.g. spouse has full-time position outside of the business) • Personal Guarantees – All parties to the loan request must be willing to pledge guarantees; personal guarantees state that the borrowers truly believe in their venture Bizness Branding Academy Powered by Lady Bizness
  16. 16. Sources of Funding • SBA Loan Programs (www.sba.gov) • 7(a) Programs • Patriot Express • SBA Express • Community Express • You will need to work with a commercial bank and the SBA for these programs - no direct SBA loans as a general rule Bizness Branding Academy Powered by Lady Bizness
  17. 17. Patriot Express Loans Issue: Patriot Express Maximum Loan Amount: $500,000 Maximum SBA Guaranty %: 75/85% Interest Rate: Rate may be fixed or variable and lenders and borrowers can negotiate interest rate, but lenders may not charge more than 2.25 percent over Prime for loans of less than 7 years and 2.75 percent over Prime for loans greater than 7 years; lenders may charge 1 percent more for loans of $50,000 or less and 2 percent more for loans of $25,000 or less. Eligibility Decision: Must meet standard SBA eligibility and must be 51 percent or more owned/controlled by: · Veteran (other than dishonorably discharged) · Active Duty Military potential retiree within 24 months of separation and discharging Active Duty member within 12 months of discharge (TAP eligible) · Reservist and National Guard · Current spouse of above or spouse of service member or veteran who died of a service-connected disability. Revolving Lines of Credit: Revolving loans allowed up to 7 years with maturity extensions permitted at the outset. SBA Turnaround Time Within 36 Hours Forms: Streamlined: Lender Uses Mostly Own Forms and Procedures. Collateral: Lenders are not required to take collateral for loans up to $25,000; may use their existing collateral policy for loans over $25,000 up to $350,000, but must take available collateral for loans greater than $350,000. Credit Decision By Lender Bizness Branding Academy Powered by Lady Bizness
  18. 18. SBA Express Loans Issue: SBAExpress Maximum Loan Amount: $350,000 Maximum SBA Guaranty %: 50% Interest Rate: Lenders and borrowers can negotiate the interest rate. Rates are tied to the prime rate (as published in the Wall Street Journal) and may be fixed or variable, but they may not exceed SBA maximums: Lenders may charge up to 6.5 percent over prime rate for loans of $50,000 or less and up to 4.5 percent over the prime rate for loans over $50,000 Eligibility Decision: By SBA, Qualified Lenders May be granted Authorization to make eligibility determinations Revolving Lines of Credit: SBAExpress allows revolving loans up to 7 years with maturity extensions permitted at the outset Turnaround Time: Within 36 Hours Forms: Lender Uses Mostly Own Forms and Procedures Collateral: Lenders are not required to take collateral for loans up to $25,000. Lenders may use their existing collateral policy for loans over $25,000 up to $150,000. For Loans greater than $150,000, follows SBA's general collateral policy Credit Decision: By Lender Bizness Branding Academy Powered by Lady Bizness
  19. 19. Community Express Loans Issue: SBA Community Express Maximum Loan Amount: $250,000 Maximum SBA Guaranty %: Follows Standard SBA Guaranty Percent Interest Rate: Community Express loans are subject to the same maximum interest rate as all SBA loans Eligibility Decision: By SBA Revolving Lines of Credit: Allows revolving loans up to 7 years Turnaround Time: Mostly Within 36 Hours Forms: Lender Uses Mostly Own Forms and Procedures Collateral: Lenders are not required to take collateral for loans up to $25,000. Lenders may use their existing collateral policy for loans over $25,000 up to $150,000. For Loans greater than $150,000, follows SBA's general collateral policy Credit Decision: By Lender Technical Assistance: Arranged or Provided by Lender Bizness Branding Academy Powered by Lady Bizness
  20. 20. Self Help Credit Union • Self Help Credit Union www.selfhelp.org (336) 378-1840 – CDC for Guilford county (and many others) – Can provide SBA LowDoc and 7(a) loans – Small Business Loans – Loans for Environmental Businesses • Self Help Credit Union – Qualifying for Self Help Loans: • Management • Cash Flow • Collateral • Equity • Credit History • Expertise in child care centers and charter schools Bizness Branding Academy Powered by Lady Bizness
  21. 21. Tips & Suggestions • Be straightforward and honest in dealing with lenders • Be prepared to ask & answer questions • Be prepared with a business plan • Understand what you are getting into • Be patient • Understand the risk associated with borrowing Bizness Branding Academy Powered by Lady Bizness
  22. 22. What is your Show Up & Show Out! Moment of the Night? Chisa D. Pennix-Brown, MBA Info@LadyBizness.com www.LadyBizness.com
  23. 23. GTCC Small Business Center 336.334.4822 – Greensboro 336.454.1126 – High Point Mark Hagenbuch ext: 62003 markh@gttc.edu DarLinda Finch ext: 62001 dkfinch@gtcc.edu Bizness Branding Academy Powered by Lady Bizness Please complete your surveys!

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