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Access to Capital: Preparing to Meet Your Lender
The document outlines various funding options for small businesses, including traditional bank loans, SBA loans, equity funding, and crowdfunding, emphasizing the importance of having accurate financial documentation and credit profiles. It provides insights on the pros and cons of each funding source and highlights resources for business owners, such as Small Business Development Centers and various financial institutions. Additionally, it offers tips for preparing loan applications and encourages entrepreneurs to seek advice and assistance from available resources.
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Access to Capital: Preparing to Meet Your Lender
- 1. Access to Capital Preparingto Meet Your Lender
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- 4. Overview: • Start arelationship with a bank early • Usually has strict guidelines • Often takes into account both personal and business credit profiles - Make sure your information is accurate and up-to-date • Requires business and financial documents - Be prepared to show two to three years of financials Pro: • Generally offer the best terms
- 5. Traditional Funding CaseStudy https://www.youtube.com/watch?v=mqN0nww4_i8 Front Line Call Center
- 6. Overview: • Some loanscan have extremely generous terms, while others may be extremely expensive to pay back or have unusual requirements. Do your research. Common Lenders: • Community Development Financial Institutions • Community Banks • Community Credit Unions • Merchant Cash Advance companies Pro: • Wide variety of options and terms
- 7. Alternative Funding CaseStudy BBQ’d Productions https://www.youtube.com/watch?v=y8gQnnsxRhI
- 8. Overview: • SBA helpsfinance start-up and existing small businesses • How can I apply for an SBA loan? • What types of loans are available? • You’ll need a business plan- Check out SBA’s business plan tool:www.sba.gov/tools/business-plan Pro: • Longer terms and potentially lower down payments compared to other types of financing
- 9. SBA’s Most PopularLoan Program: 7(a) https://www.youtube.com/watch?v=TPNnRVgLSBs&list=PLrwM1ZVcvDha2z8kvYx_wuW3uQxy58BEZ&index=9
- 10. Overview: • Generally includesany time you give up some “ownership” in the company in exchange for operating • Requires that your business be legally set up to allow for outside investment (i.e. not an option for sole-proprietorships) • With the exception of “family,” this type of investment is generally limited to “accredited investors” Common Funders: • Friends and Family • Angel Funding • Venture Capitalists Pro: • Can be a wonderful way to bring on investors who have a financial stake in your success
- 11. Equity Funding CaseStudy https://www.youtube.com/watch?v=2Fl_wpnez7Y Moxie Jean
- 12. Overview: • Popular fundingoptions where you ask a “crowd” to fund an idea • Under existing SEC law, only “accredited investors” can use crowdfunding to invest in equity Popular Platforms: • Indiegogo • Kickstarter • RocketHub • Peerbackers Pro: • Generally used to pre-sell products or opportunities
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- 15. Personal Credit House Student Loans CarLoans Personal credit cards Building Lease Equipment Business Loans Business contracts Business Creditvs Helpful tip: Reduce risking your personal assets by avoiding using personal credit card for business expenses.
- 16. Personal Credit vs.Business Credit https://www.youtube.com/embed/OFs3Hj_sXkM
- 17. 1. Short descriptionof the business 1. Historical financial statements 2. Projections and budgets 3. Schedule of off balance sheet assets and liabilities, including contingencies 4. Accounts receivable, accounts payable and inventory aging 6. Schedule of fixed assets 7. Tax returns 8. Personal financial statements and information 6. Honest and transparent information on the business, including any sort of management issues. Tips for Applying for a Loan
- 18. Be Prepared toAnswer: 1. Do you currently have enough income (whether it’s personal or business) to cover all of your personal expenses with funds left over each month? 2. Are you prepared to offer collateral for the loan (personal assets such as home, car or savings)?
- 19. Things to AVOID: 1.Disqualifying yourself before you get through the door. - Even if you think there is a chance you might not be qualified, still go. Meeting with lenders can open doors to other possibilities and even introductions to the ones that may be a fit. 2. Resistance to advice or change. - Be prepared to listen to the lender and know that the path to your goals may not be as direct as you envisioned.
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- 21. Small Business DevelopmentCenters (SBDC’s) Services include: business plan development, manufacturing assistance, financial packaging and lending assistance, exporting and importing support, disaster recovery assistance, procurement and contracting aid, market research help, 8(a) program support, and healthcare guidance SCORE • Trained counselors, advisor and mentors to aspiring entrepreneurs and business owners • Run by volunteer executives (or former executives) • Services are generally free and operate throughout the US SBA District Offices SBA District Offices offer counseling, training and business development specialists to help start and grow your business.
- 22. The Veterans BusinessOutreach Program (VBOP) is designed to provide entrepreneurial development services such as business training; counseling and mentoring; and referrals for eligible veterans owning or considering starting a small business. Services include: • Pre-Business Plan Workshops • Entrepreneurial Training and Counseling • Mentorship • Assistance and training in topics such as exporting, franchising, marketing, accounting and more. Certified Development Companies (CDCs) are nonprofit corporations certified and regulated by the SBA, that work with participating lenders to provide financing to small businesses. There are 270 CDCs nationwide, each covering a specific geographic area. Veterans Business Outreach Centers Certified Development Companies (CDCs) Women’s Business Centers A network of over 100 community-based centers that provide business training, counseling, coaching, mentoring and other assistance geared toward women.
- 23. Association for EnterpriseOpportunity(AEO) • A network of a broad range of institutions and providers of business development and support services • Business training and/or technical assistance • Many programs focus on disenfranchised business owners Opportunity Finance Network (OFN) OFN is a national network of CDFIs who specialize in investing in opportunities that benefit low-income, low wealth, and other disadvantaged communities across America. Community Development Financial Institutions (CDFIs) The US Treasury Department's CDFI Fund has certified more than 900 CDFIs across the country. Many of these financial institutions not only provide financial services, but also have business training and technical assistance available to entrepreneurs in their local area.
- 24. Resources Links to allthese organizations and more can be found at: accesstocapital.com/links/
Editor's Notes
- #2 Hello everyone… Thank you to the Small Business Administration for hosting this webinar today and thank YOU for taking the time to participate. Today we hope to help you understand the funding alternatives available and how to best prepare to meet with a lender. We’ll share some real lending stories from real business owners and provide some valuable resources at the end of our presentation. Small businesses are the backbone of our economy, they are also the catalyst of change for our neighborhoods and community development. Too often, small businesses experience more challenges than mid sized or larger businesses in accessingthe capital that they need in order to start up or grow their business. At Dun & Bradstreet Credibility Corp we strongly about preparing businesses properly on their growth journey. This is why we have created Access to Capital events across the country and through these events captured stories of funding failures and ultimate success from businesses just like yours. That leads me right into today’s discussion……
- #3 Do you think a bank loan will help you grow your business? Do you know what it takes to get that loan? Have you considered alternative lending options? How about equity options? For many, the journey to access capital for a startup or growing business can feel like daunting excursion into the unknown. The good news is that there are plenty of organizations in your local community that have the resources and assistance to help you prepare. Today we’ll cover lending options and how to prepare for your journey to access capital. Overview:· What are the lending options available to business owners in today’s climate?· How do business owners who successfully get loans prepare before meeting a lender? preparation· What are the resources available to help you get further educated on your options?
- #4 Section 1: What are the lending options available to you? · Four general types of lending options:o Traditional Lendingo Alternative Lendingo Equity fundingo Crowdfunding· Key to success is knowing what type is right for your business
- #5 Overview:Heavily Regulated [speaker notes: Includes the strongest consumer protections]Relatively Strict Guidelines [speaker notes: Often the most uncompromising]Personal & Business Credit [speaker notes: Will often expect and examine both personal and business credit]Pro: Generally offer the best termsTo Do:Start Early: [speaker notes: develop a relationship with your banker long before you *ask* for a large business loan] People invest in people… connect, build relationships, be transparent. I cant stress enough the need to develop a relationship with your banker. Arrive Prepared [speaker notes: In particular, be prepared to show up with three years of financials. Don’t have them? How about a business plan?]Ensure Accuracy [speaker notes: banks will often look to ensure the contact and financial information you claim is reflected in your personal and business credit reports.]
- #6 I want to share with you a video of Jill Blankenship, CEO and founder of Frontline Call Center, located in the San Juan Islands. We met Jill at our Access to Capital Money to Mainstreet in Seattle Washington… she shares her story and experience with traditional funding and the difference it has made for her business and her community. Access to Capital: Money to Mainstreet is an event presented by Dun & Bradstreet Credibility Corp. aimed at educating business owners and entrepreneurs on the many ways they can acquire the money they need to start and grow their businesses. With panels of lending experts in one room, and the ability to meet one-on-one with lending representatives in the other, Access to Capital is a unique event that brings business owners and lenders together.
- #7 So let’s say….traditional lenders said no…declined your biz plan… what do you do now? Alternative lending may be the best option for youLoan rates vary extensively [speaker notes: Look for lenders who are committed to your business success. Also, look at the fine-print]Pay-back times vary extensively [speaker notes: some loans have stiff “early payment” penalties or require you to use complimentary products over an extensive time-frame]Do your research [speaker notes: Are you being realistic in how quickly you’ll be able to pay back the loan?]Ask yourself one simple question: Can you afford it? If taking out an alternative loan will cost you more money than it'll make you, it's time to start rethinking your optionsPro: Wide variety of options and termsToDo:Read the Fine PrintFind an Experienced LenderResearch ReferencesCommon Lenders:Community Development Financial Institutions * Community Banks * Community Credit Unions * Merchant Cash Advance companies ….(Higher interest rates than traditional lending…..Interest rates somewhere between banks rates and cc interest rates)…….you may not have a+ type credit…or you may just be starting with no cash flow……. (then you may have much quicker access to alternative types of financing)
- #8 In May 2013….we hosted Access to Capital ; Money to Mainstreet at Chicago’s Navy Pier…….At the event Dun & Bradstreet Credibility Corp hosted Growing Chicago: $10K Business Plan Pitch Contest created for Illinois entrepreneurs seeking to grow or start their business. The winning entry received a $10,000 check from Dun & Bradstreet Credibility Corp. One of the top 5 finalist within that contest was Kris Schoenbergerof BBQ’dProductions. Kris didn’t win the money but he won big that day when we introduced him to Accion and The Sam Adams Brewing theAmerican Dream program. Kris took that small amount of money and turned it into a new food truck and now a much larger thriving business. Today Kris business is featured on bottles of Sam Adams beer. Are there entrepreneurs out there in the food business looking for some help to get started? Sam Adams, through Accion, may be able to help you.Let’s listen to what Kris has to add about alternative lending and the difference it made for his business.
- #9 So let’s say….traditional lenders said no…declined your biz plan… what do you do now? Alternative lending may be the best option for youLoan rates vary extensively [speaker notes: Look for lenders who are committed to your business success. Also, look at the fine-print]Pay-back times vary extensively [speaker notes: some loans have stiff “early payment” penalties or require you to use complimentary products over an extensive time-frame]Do your research [speaker notes: Are you being realistic in how quickly you’ll be able to pay back the loan?]Ask yourself one simple question: Can you afford it? If taking out an alternative loan will cost you more money than it'll make you, it's time to start rethinking your optionsPro: Wide variety of options and termsToDo:Read the Fine PrintFind an Experienced LenderResearch ReferencesCommon Lenders:Community Development Financial Institutions * Community Banks * Community Credit Unions * Merchant Cash Advance companies ….(Higher interest rates than traditional lending…..Interest rates somewhere between banks rates and cc interest rates)…….you may not have a+ type credit…or you may just be starting with no cash flow……. (then you may have much quicker access to alternative types of financing)
- #10 In May 2013….we hosted Access to Capital ; Money to Mainstreet at Chicago’s Navy Pier…….At the event Dun & Bradstreet Credibility Corp hosted Growing Chicago: $10K Business Plan Pitch Contest created for Illinois entrepreneurs seeking to grow or start their business. The winning entry received a $10,000 check from Dun & Bradstreet Credibility Corp. One of the top 5 finalist within that contest was Kris Schoenbergerof BBQ’dProductions. Kris didn’t win the money but he won big that day when we introduced him to Accion and The Sam Adams Brewing theAmerican Dream program. Kris took that small amount of money and turned it into a new food truck and now a much larger thriving business. Today Kris business is featured on bottles of Sam Adams beer. Are there entrepreneurs out there in the food business looking for some help to get started? Sam Adams, through Accion, may be able to help you.Let’s listen to what Kris has to add about alternative lending and the difference it made for his business.
- #11 Equity Funding Have a unique technology, product, service or app in a hot space? Equity funding Might be an option. [speaker notes: here you’re giving others an “ownership” stake in your company]Requires Special Structure [speaker notes: for example, you can’t offer outside equity for a sole-proprietorship]More Limited Investment Opportunities [speaker notes: with the exception of “family”, this type of investment is generally limited to “accredited investors”]Equity funding is sometimes harder to raise than almost any other type of funding. Convertible Equity or a convertible note is a vehicle that provides a fast, cheap and flexible way for angel investors to invest money in a startup, that converts to equity at the time of a future round. ProStrongly incentivizes outside investors to help create your financial successToDoResearch “angel investor”Prepare your “pitch” (Create a concise and compelling pitch) Take part in angel investment events Common FundersFriends and Family (Love Money) * Angel Funding * Venture Capitalists
- #12 Let’s look at a video that includes Sharon Schneider, CEO of Moxie Jean, who we met in May of 2013 at our Access to Capital Chicago event. In this clip she discusses how she boosted Moxie Jean using investor capital.The Moxie Jean S T O R YMoxie Jean was founded by two modern, busy moms -- Sharon Schneider and Sandra Pinter -- sisters who wanted to save time, save money AND save the planet--and didn't want to sacrifice style to do so. By providing a curated, stylish selection of like-new kids' clothes at consignment sale prices, sizes from Newborn to size 14. So its an upscale resale for childrens clothing.
- #13 Overview“Community” funding [speaker notes: you’ll be asking the “crowd” to fund your business idea or product]Buzz Worthy Funding [speaker notes: some of the crowdfunding successes have made this approach extremely popular as you can “validate” an idea before ever producing a product and often get the community to fund it’s development.]Still Limited [speaker notes: under existing SEC law, only “accredited investors” can use crowdfunding to invest equity in a business]Pro:Great for validating a business idea at very little costToDo:Research Successful Campaigns [speaker notes: almost all crowdfunding projects to date have common elements that involve building a strong community. Learn those keys!]Start Small [speaker notes: you don’t need to necessarily fund the “big” idea… maybe use the platform to build support for “step 1”]Popular platforms:Indiegogo * Kickstarter * RocketHub *Peerbackers
- #14 In this clip we are featuring a company called Bohemian Guitars whose co-founders Adam and Sean Lee discuss crowdfunding their startup. They shared their experience at Access to Capital in Atlanta.
- #15 *Entrepreneurs Go After It!They Plan for Success…….They know its important to get in the right room with the right funder.And once they are there they are completely prepared! They know its important to have a concise and compelling pitch!
- #16 Make sure your credit is in order. This goes for both your personal credit and your business credit. Many business owners leverage personal assets to start or grow their business which could put their personal assets at risk if their business fails. Early on this may be necessary but by establishing business credit early on, you are taking the right steps to reduce your personal liability. Business credit, once established can be useful in obtaining more than business loans and credit lines. It can additionally come into play when trying to negotiatelower interest rates or negotiating better payment terms with vendors or when bidding on government contracts or applying for supplier status.
- #17 Before meeting with a lender, it’s important to know the difference personal credit and business credit. Let’s take a look at this helpful video
- #18 So now we want to cover tips for applying for a loan… First and foremost….Tell your company's story. One of the most basic errors made by loan applicants is not telling why their company needs the money. And not revealing why they should approve the loan even though their company may not meet the minimum standards. Is your industry experiencing growth? Are you scheduled to partner with a major retailer? What's your story? "Don't just say you want a loan, turn in your documentation, and expect the loan to be approved…"Fine-tune your business pitch to include your future prospects--not just highlight past successesTips for applying for a loan… Make sure your business is in order! The devil is in the details (in more ways than one) when it comes to business loans. Not only do business owners need to ensure that the people they're borrowing from are reputable and honest, they also need to make sure their own personal credentials are in order before approaching potential lenders.There's a lot of information you'll have to provide when applying for a loan, including personal tax information, bank statements and, in some cases, résumés, educational background information and criminal records Application processes for different kinds of loans vary greatly depending on the size of the loan, the terms of the loan and who is doing the lending.
- #20 They ask for help…. *Ask what other ideas do you have for meThey network……. *Who else do you think I should speak with about this…
- #21 And now on to local and national resources in your local area to help you get the financing you need….
- #22 The SBA partners with many organizations nation wide with resources you can depend on at little or no cost. The general goals of these organizations is that they are made up of business and financial experts who genuinely want to help and some like Score even provide coaching.You can count on these organizations to provide assistance in both starting a company and growing an existing business. To find a location near you for any of these resources, go to http://www.sba.gov/tools/local-assistance.
- #23 MoreSBA partners with many organizations nation wide withresources you can depend on at little or no cost and provide counseling, training, coaching and mentoring. The general goals of these organizations is that they are made up of business and financial experts who genuinely want to help.You can count on these organizations to provide assistance in both starting a company and growing an existing business. To find a location near you for any of these resources, go to http://www.sba.gov/tools/local-assistance.
- #24 Community Development Financial Institutions, or CDFIs, offer not only financial assistance but provide business and technical support to entrepreneurs in all stages of their business’s journey. AEO and OFN are two national trade organizations that can assist you with finding a CDFI in your area that can provide you with possible funding and support along the way. To find a local CDFI in your area, you can go to AEO’s website at www.AEOWORKS.ORG and OFN’s site at OFN.ORG.