Ishpeming Business Resource Guide
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ISHPEMING RESOURCE GUIDE
Starting and managing a small business is a complex undertaking.
The small business owner is confronted with a multitude of demands: taxes, insurance, financial resources, licenses and many more. This guide is developed to guide you to the answers to some of these questions. It is focused on establishing a business in Ishpeming.
For further information after reading this guide please contact:
Ishpeming Main Street Program
100 East Division Street
Ishpeming MI 49849
Email: ishmsd@charter.net
Phone: 906.486.6853
Fax: 906.485.6246
Data in this guide was compiled by the Economic Restructuring Committee of the Ishpeming Main Street Program and the information is current as of October 15, 2007
DO YOU HAVE THE POTENTIAL TO BE A SMALL BUSINESS OWNER?
Rate each of the following 11 characteristics using the following scale. +2= Very strong in this characteristic +1= Possess this characteristic 0 = Don�¢??t know -1 = Have very little of this characteristic -2 = Do not possess this characteristic / too little to Find the number that best suits you.
Creative Take Calculated Risk Self-Confident
Dynamic Like to Lead Others Market Savvy
Resourceful Persevere/Determined Optimistic
Knowledgeable High Energy Level
Total ________
Total your score for the eleven characteristics. Add the pluses and subtract the minuses. Your score will fall between 22 to +22. Below 15? Wait and try another day because if your between +10 and +15 you have leadership instincts that can someday put you over the top.
A high positive score demonstrates you share many of the characteristics of successful business owners. Negative or low positive scores indicate you may not currently possess or rely on these characteristics. Low scores do not mean one will not be an entrepreneur. High positive scores likewise do not guarantee it either.
One's job, experience, and motivation have much to do with it. One can go from fairly passive to fairly positive on this scale with just the loss of a job. Displaced persons are among the most successful of small business owners regardless of what their prior traits indicated. Yet, it may appear to some that measuring traits is pointless because even if one has the traits, it does not guarantee that individual is, or can be, a small businessperson. The reasons are fairly plain to see. When it comes to academic research for example, this simple fact is often, if not entirely, overlooked. It is the question of personal �¢??success�¢??. If, for example, an individual tested or assessed has all the apparent attributes of an entrepreneur profile and then fails in their new venture they undertake, the mantel of a small businessperson can never be worn because the word "Entrepreneur" embodies the word "Success".
THE BUSINESS PLAN:
Writing The Plan What goes in a business plan? The body can be divided into four distinct sections:
1) Description of the business
2) Marketing
3) Finances
4) Management
Agenda should include an executive summary, supporting documents, and financial projections. Although there is no single formula for developing a business plan, some elements are common to all business plans. They are summarized in the following outline:
Elements of a Business Plan 1. Cover sheet 2. Statement of purpose 3. Table of contents 4. Executive Summary (2-5 pages) Bankers and other investors are looking for clear, compelling and credible information to have confidence in you and your idea. Write this section last. Be concise but cover all the bases. (Lengthy explanations and examples should be left to the body of the full plan) Cover the same information as you would in a five minute oral presentation.
I. The Business A. Description of business 1. Is this a new business or are you purchasing an existing one. If it is a franchise, so indicate and include a copy of the franchise agreement. 2. What will you do 3. How will you make money (business model) 4. One sentence description of the product or service 5. Status of business development 6. Legal form of ownership
B. Marketing: Define the potential customers in your market and the pain they are experiencing without your product
1. Your solution to their problem; and the amount of time, money, and aggravation your product will save the customer
2. Market potential
3. Your sales potential within five years
4. Competitive advantage
5. Marketing and sales strategy
C. Competition
D. Management Team Highlights Who is going to be leading this effort? What is their background and do they have a proven track record?
E. Product or Service: Describe your product(s) or Service(s) and the important features you will bring to the market. What are the benefits your product(s) provides to the customers in your target market.
F. Market Niche: When planning your company, look for a market niche to target, a portion of the market in which you have a unique advantage; or a small corner largely overlooked or underexploited by the competition. Describe your market niche, your target customers, their characteristics and geography (Demographics) For consumer products or services, demographics often include: 1. Age 2. Gender 3. Location 4. Income level 5. Occupation 6. Education 7. Other
For business customers, the demographic factors include: 1. Industry 2. Location 3. Size of firm 4. Technology platforms 5. Other
G. What are the barriers to entry: How will you keep competitors from entering your market with similar products?
II. Financial Data A. Loan applications B. Capital equipment and supply list C. Balance sheet D. Breakeven analysis E. Pro-forma income projections (profit & loss statements) F. Three-year summary G. Detail by month, first year H. Detail by quarters, second and third years I. Assumptions upon which projections were based J. Pro-forma cash flow
III. Supporting Documents A. Tax returns of principals for last three years Personal financial statement (all banks have these forms) B. For franchised businesses, a copy of franchise contract and all supporting documents provided by the franchisor C. Copy of proposed lease or purchase agreement for building space D. Copy of licenses and other legal documents E. Copy of resumes of all principals F. Copies of letters of intent from suppliers, etc.
If you have never written a business plan, there are several reasonable resources available to help you:
Ishpeming Main Street Program Lake Superior Community Partnership 100 East Division Street Located in the National Ski Hall of Fame Ishpeming MI 49849 Ishpeming MI 49849 906.486.6853 906.486.4841
Biz Resource Center Northern Initiatives Marquette Michigan Works! 228 West Washington Street 498 O�¢??Dovero Drive Marquette MI 49855 Marquette MI 49855 906.228.5571 906.228.3075
LOCATING YOUR BUSINESS:
There are many ways to find a location for your business. You can use a realtor, ask friends, look for building for sale or rent or even start out of your home. What is most important is that you take into consideration accessibility to the market and what you can afford. There is help available once you have determined what you can afford based on your business plan.
Ishpeming Main Street Program Lake Superior Community Partnership 100 East Division Street Located in the National Ski Hall of Fame Ishpeming MI 49849 Ishpeming MI 49849 906.486.6854 906.486.4841
Ishpeming City Manager�¢??s Office 100 East Division Street Ishpeming MI 49849 906.485-1091
FINANCING:
There are two types of capital:
Debt Capital (a loan) carries with it a legal obligation to repay the investment within a specified time period, with interest. Commercial lenders will generally require collateral or the borrower�¢??s personal guarantee in case of default. This protects the lender and ensures that the borrower has a sufficient personal interest at stake to work diligently at the business.
Equity Capital (investment by an angel or venture capitalist in exchange for shares in the company) Unlike loans from Commercial Banks or government lenders, you are not morally or legally obligated to refund as equity investment if the business fails and you have made an honest best effort. However, if the business is successful, you may wind up paying back more than you would have with a loan. A loan calls for a specific interest rate, no more, no less. However an equity contract will contain an agreed upon share of ownership for the investor. This may result in a larger or smaller amount than interest and principal payments to a lender.
Equity investing can be especially useful if the company is already carrying a large amount of debt. Loading up with increasing amounts of debt may eventually drive the company into insolvency. Banks can call in overdue loans and force the company to liquidate its assets in order to pay down debt. SOURCES OF CAPITAL:
Personal Savings (Equity Capital)
The more money you personally invest in your business, the easier it will be to attract financing. Banks and outside investors feel confident you will stick with the venture if you have skin in the game.Also, your personal investment leverages their investment. Investors will only consider cash contributions on your part, not the value of your time. But only invest what you can afford to lose; be careful about betting your retirement fund on a new business or one that has limited potential. Determine how much you need to start the business (from the business plan) and set that as your savings goal, plus a reserve for contingencies. (Don't forget to include 12 months of living expenses in your capital needs. You probably won't be able to draw money out of the business for at least that long.)
Family and Friends (Debt or Equity Capital)
Along with personal savings, this is the most common source of capital for new businesses. Often, these loans are forgivable. Family members and friends may not require personal guarantees and therefore will not foreclose on your home, but be careful not to risk more family and friends than you can afford to lose.
Commercial Banks (Debt Capital)
Savings and Loans do not make business loans.
Government Lenders (Debt Capital)
STATE LENDER: The MEDC (Michigan Economic Development Center) is Michigan's one-stop resource for businesses seeking to grow in Michigan. Formed in 1999, the MEDC consolidates all of Michigan's economic development programs into an organization that runs like a business. As a public corporation created through cooperation between state and local governments, the MEDC is a liaison with local communities and agencies across the state. It is guided by a board comprised of members who represent a cross-section of the state economy, business owners and executives, local economic developers and college presidents. At the individual company level, the MEDC is a supplier of customized economic development services delivered by account managers. At the community level, it is working to assure that Michigan's cities and towns are prepared to compete in the new high-technology environment. The MEDC is also actively promoting the growth of companies in the emerging high technologies: alternative energy, life sciences, homeland security/defense and automotive/advanced manufacturing.
FEDERAL LENDERS: The SBA offers numerous loan programs to assist small businesses. It is important to note, however, that the SBA is primarily a guarantor of loans made by private and other institutions and does not offer loans to small businesses. 7(a) loans are the most basic and most used type loan of SBA's business loan programs. Its name comes from section 7(a) of the Small Business Act, which authorizes the Agency to provide business loans to American small businesses.
All 7(a) loans are provided by lenders who are called participants because they participate with SBA in the 7(a) program. Not all lenders choose to participate, but most American banks do. There are also some non-bank lenders who participate with SBA in the 7(a) program which expands the availability of lenders making loans under SBA guidelines.
7(a) loans are only available on a guaranty basis. This means they are provided by lenders who choose to structure their own loans by SBA's requirements and who apply and receive a guaranty from SBA on a portion of this loan. The SBA does not fully guaranty 7(a) loans. The lender and SBA share the risk that a borrower will not be able to repay the loan in full. The guaranty is a guaranty against payment default. It does not cover imprudent decisions by the lender or misrepresentation by the borrower.
Under the guaranty concept, commercial lenders make and administer the loans.
The business applies to a lender for their financing. The lender decides if they will make the loan internally or if the application has some weaknesses which, in their opinion, will require an SBA guaranty if the loan is to be made. The guaranty which SBA provides is only available to the lender. It assures the lender that in the event the borrower does not repay their obligation and a payment default occurs, the Government will reimburse the lender for its loss, up to the percentage of SBA's guaranty. Under this program, the borrower remains obligated for the full amount due.
All 7(a) loans which SBA guaranty must meet 7(a) criteria. The business gets a loan from its lender with a 7(a) structure and the lender gets an SBA guaranty on a portion or percentage of this loan. Hence the primary business loan assistance program available to small business from the SBA is called the 7(a) guaranty loan program.
A key concept of the 7(a) guaranty loan program is that the loan actually comes from a commercial lender, not the Government. If the lender is not willing to provide the loan, even if they may be able to get an SBA guaranty, the Agency can not force the lender to change their mind. Neither can SBA make the loan by itself because the Agency does not have any money to lend. Therefore it is paramount that all applicants positively approach the lender for a loan, and that they know the lenders criteria and requirements as well as those of the SBA. In order to obtain positive consideration for an SBA supported loan, the applicant must be both eligible and creditworthy.
What SBA Seeks In A Loan Application: In order to get a 7(a) loan, the applicant must first be eligible. Repayment ability from the cash flow of the business is a primary consideration in the SBA loan decision process but good character, management capability, collateral, and owner's equity contribution are also important considerations. All owners of 20 percent or more are required to personally guarantee SBA loans.
Eligibility Criteria: All applicants must be eligible to be considered for a 7(a) loan. The eligibility requirements are designed to be as broad as possible in order that this lending program can accommodate the most diverse variety of small business financing needs. All businesses that are considered for financing under SBAs 7(a) loan program must: meet SBA size standards, be for-profit, not already have the internal resources (business or personal) to provide the financing, and be able to demonstrate repayment. Certain variations of SBAs 7(a) loan program may also require additional eligibility criteria. Special purpose programs will identify those additional criteria.
Eligibility factors for all 7(a) loans include: size, type of business, use of proceeds, and the availability of funds from other sources. The following links will provide more detailed information on these eligibility issues.
The CDC/504 loan program is a long-term financing tool for economic development within a community. The 504 Program provides growing businesses with long-term, fixed-rate financing for major fixed assets, such as land and buildings. A Certified Development Company is a nonprofit corporation set up to contribute to the economic development of its community. CDCs work with the SBA and private-sector lenders to provide financing to small businesses.
Typically, a 504 project includes a loan secured with a senior lien from a private-sector lender covering up to 50 percent of the project cost, a loan secured with a junior lien from the CDC (backed by a 100 percent SBA-guaranteed debenture) covering up to 40 percent of the cost, and a contribution of at least 10 percent equity from the small business being helped.
Maximum Debenture The maximum SBA debenture is $1,500,000 when meeting the job creation criteria or a community development goal. Generally, a business must create or retain one job for every $50,000 provided by the SBA except for "Small Manufacturers" which have a $100,000 job creation or retention goal (see below).The maximum SBA debenture is $2.0 million when meeting a public policy goal.
The public policy goals are as follows:
1. Business district revitalization.
2. Expansion of exports.
3. Expansion of minority business development.
4. Rural development.
5. Increasing productivity and competitiveness.
6. Restructuring because of federally mandated standards or policies.
7. Changes necessitated by federal budget cutbacks.
8. Expansion of small business concerns owned and controlled by veterans
(especially service-disabled veterans)
9. Expansion of small business concerns owned and controlled by women.
The maximum debenture for "Small Manufacturers" is $4.0 million. A Small Manufacturer is defined as a small business concern that has: Its primary business classified in sector 31, 32, or 33 of the North American Industrial Classification System (NAICS); and All of its production facilities located in the United States.
In order to qualify for a $4 million 504 loan, the Small Manufacturer must 1) meet the definition of a Small Manufacturer described above, and 2) either (i) create or retain at least 1 job per $100,000 guaranteed by the SBA [Section 501(d)(1) of the Small Business Investment Act (SBI Act)], or (ii) improve the economy of the locality or achieve one or more public policy goals [sections 501(d)(2) or (3) of the SBI Act].
What funds may be used for : Proceeds from 504 loans must be used for fixed asset projects such as: purchasing land and improvements, including existing buildings, grading, street improvements, utilities, parking lots and landscaping; construction of new facilities, or modernizing, renovating or converting existing facilities; or purchasing long-term machinery and equipment.
The 504 Program cannot be used for working capital or inventory, consolidating or repaying debt, or refinancing.
Terms, Interest rates and Fees: Interest rates on 504 loans are pegged to an increment above the current market rate for five-year and 10-year U.S. Treasury issues. Maturities of 10 and 20 years are available. Fees total approximately three (3) percent of the debenture and may be financed with the loan.
Collateral: Generally, the project assets being financed are used as collateral. Personal guaranties of the principal owners are also required.
Eligible Business: To be eligible, the business must be operated for profit and fall within the size standards set by the SBA. Under the 504 Program, the business qualifies as small if it does not have a tangible net worth in excess of $7.5 million and does not have an average net income in excess of $2.5 million after taxes for the preceding two years. Loans cannot be made to businesses engaged in speculation or investment in rental real estate
The Microloan Program provides very small loans to start-up, newly established, or growing small business concerns. Under this program, SBA makes funds available to nonprofit community based lenders (intermediaries) which, in turn, make loans to eligible borrowers in amounts up to a maximum of $35,000. The average loan size is about $13,000. Applications are submitted to the local intermediary and all credit decisions are made on the local level.
Terms, Interest Rates, and Fees: The maximum term allowed for a microloan is six years. However, loan terms vary according to the size of the loan, the planned use of funds, the requirements of the intermediary lender, and the needs of the small business borrower. The maximum loan amount is $35,000, however, the average loan amount is around $13,000. Interest rates vary, depending upon the intermediary lender and costs to the intermediary from the U.S. Treasury. Generally these rates will be between 8 eight percent and thirteen percent.
Collateral Each intermediary lender has its own lending and credit requirements. However, business owners contemplating application for a microloan should be aware that intermediaries will generally require some type of collateral, and the personal guarantee of the business owner.
Technical Assistance Each intermediary is required to provide business based training and technical assistance to its microborrowers. Individuals and small businesses applying for microloan financing may be required to fulfill training and/or planning requirements before a loan application is considered.
How to Apply: Small businesses that are interested in applying for a microloan should contact a microlender in their area. The following link contains a state-by-state list of all SBA participating Microlending Intermediaries and their areas of operation. SBA Microlending Intermediaries
Information For Non-Profit Entities Seeking To Become Intermediary Lenders
Applying to become an Intermediary
Organizations interested in becoming Intermediaries should contact SBA for information on the application process and should review the regulations published in the Code of Federal Regulations, specifically sections 120.700-120.716. In order to participate in the program, applicants must meet three general criteria:
A. An applicant must be organized as a non-profit organization, quasi-governmental
economic development corporation, or an Agency established by a Native American
Tribal Government;
B. An applicant must have made and serviced short-term fixed rate loans of not more
than $35,000 to newly established or growing small businesses for at least one year
C. An applicant must have at least one year of experience providing technica
assistance to itto borrowers.
D. Applications should contain supporting information describing:
1. The types of businesses assisted in the past and those the applicant intends to
assist with Microloans;
2. The average size of the loans made in the past and the average size of
intended Microloans;
3. The extent to which the applicant will make Microloans to small businesses in
rural areas;
4. The geographic area in which the applicant intends to operate, including a
description of the economic and demographic conditions existing in the
intended area of operations;
5. The availability and cost of obtaining credit for small businesses in the area;
6. The applicant's experience and qualifications in providing marketing,
management, and technical assistance to small businesses;
7. Any plan to use other technical assistance resources (such as counselors from
the Service Corps of Retired Executives) to help Microloan borrowers. (there is
no SCORE chapter in the UP. See Ishpeming Main Street Program)
For More information about participation in the Microloan Program as an Intermediary, applicants should use the following link and also contact their local SBA District Office. Information for Non-Profit Entities seeking to participate in the Microloan Program
SPECIAL PURPOSE LOANS The SBA offers various special purpose loans that can assist you and your business. This includes loans to help you grow your business to meet demand internationally, to aid business that have been impacted by NAFTA, to assist you in implementing employee ownership plans and help implement pollution control mechanisms, in addition to other special programs. Within Special Purpose Loans will review: 1. Export Working Capital 2. Export Express 3. International Trade Loans 4. Delta 5. CAIP Program 6. Employee Trusts 7. Pollution Control 8. CAPlines
LISTING OF POSSIBLE GRANT SOURCES
13 CFR 143 Uniform Administrative Requirements for Grants and Cooperative Agreements to State and Local Governments
The Federal Commons - (Now points to Grants.gov) an Internet grants management portal serving the grantee organization community.
The Catalog of Federal Domestic Assistance - Link to resource about the Federal Domestic Assistance grants
Grant Writing Tips - Afterschool.gov - Link to Afterschool.gov's site on grant writing.
Department of Commerce's Federal Grants Page - Link to the Department of Commerce's page of FAQs regarding federal grants
e-GRANTS, The Department of Education's (ED) portal site for electronic grants - The Department of Education's (ED) portal site for electronic grants
Department of Health Resources and Services Administration (HRSA) - Grants and Contracts: Link to the Office for the Advancement of Telehealth's grant page.
Department of Justice - Ten Grants - Link to the Department of Justice's page with grant opportunities.
Department of Labor (DOL) - Employment and Training Administration - Welfare-to-Work - Grants listing by State - Link to the Department of Labor's Employment and Training Administration's page with various grant opportunities.
Department of Transportation - Federal Highway Admn - Universities and Grants Programs - Link to the DOT's Universities and Grants Programs main page.
HRSA - Office of Rural Health Policy - Grants - Link to the Department of Health and Human Services' Rural Health Policy's funding page.
Department of Labor - Grant and Contract Information - Link to the Department of Labor's page on grant and contract information.
Department of Transportation (DOT) - Hazardous Materials Emergency Preparedness (HMEP) grant program - Link to the Hazardous Materials Safety's Hazardous Materials Emergency Preparedness' grant program page.
DOT's State Highway Program Grants - Link to the TEA-21 State Highway Safety Programs' page
EPA's Grants Information Overview - Link to the EPA's Grants Information and Control System page.
EPA's Environmental Research Grant Announcements - Link to the EPA's Grants Information and Control System page.
EPA's Region IV Grants and Financial Assistance - Link to the EPA's National Center for Environmental Research funding and opportunities page.
Housing and Urban Development (HUD) - Grants - Link to HUD's Grant page.
National Cancer Institute - Research Projects Grants - Link to the National Cancer Institute's page on the plan and budget for fiscal year 2005
National Endowment for the Humanities - Grants and Applications - Link to the National Endowment for the Humanities' Apply for a Grant page.
GrantsNet - U.S. Department of Health and Human Services - Link to the Department of Health and Human Services' grant page
NIH - Grants and Funding Opportunities - Link to the National Institutes of Health's page on grants and funding opportunities.
National Oceanic and Atmospheric Administration (NOAA) - Business and Grants Opportunities - Link to NOAA's page on business and grant opportunities.
NOAA Sponsored - National Sea Grant - Link to NOAA's page on National Sea Grants
.National Park Service (NPS) - Grants and Tax Credits - Link to the National Park Service's page on grants and tax credits.
National Science Foundation (NSF) - Overview of Grants and Awards - Link to the NSF's page on funding, grants, and awards
Office of Electronic Commerce - Grants - Link to E-gov's homepage, including grants.
Office of Naval Research - Grants, Contracts and Acquisition - Link to the Office of Naval Research's page on grants, contracts, and acquisitions. Federal and State Technology Partnership Program)
PROGRAMS FOR SPECIAL AUDIENCES:
The SBA is a strong advocate of minority and special audiences. Whether you're looking for information on programs and services in support of women entrepreneurs, veteran's business development, Native Americans, special minority programs including HUBZone, Small Disadvantaged Business Certification and 8(a) business development, you'll find it here. Additionally, we've devoted an entire site to young entrepreneurs - the future of America's small businesses and international trade. Topics include:
1. Women Entrepreneurs
2. Veterans
3. Native Americans
4. Opportunity Gaps
5. Young Entrepreneurs
6. International Trade
7. En Espanol
VENTURE CAPITALISTS: (Equity Capital)
A Venture Capitalist is a professional firm that specializes in investments in entrepreneurial ventures. A VC receives funds from individuals, pension funds, banks, insurance companies, and other Limited Partners to invest on their behalves. Venture Capitalists are generally reluctant to invest in start-ups because of their higher risk. Venture Capitalists prefer established companies with proven concepts and the potential for $50 million in sales. Quality management, a competitive or innovative advantage and industry growth are also major considerations. They look for firms that require typically $3,000,000 to $20,000,000 in new capital.
ANGEL INVESTORS (Equity Capital)
A private investor, or Angel, operates like a venture capitalist. They are considered to be informed, high net worth individuals and are typically successful entrepreneurs themselves. They will invest between $25,000 and $1,000,000. It is important for you and the angel investor to get to know each other, test compatibility, and clearly understand each others expectations.
SOURCES OF CAPITAL FOR ESTABLISHED BUSINESSES
1. CASH FLOW MANAGEMENT:
Will a large customer prepay in exchange for a discount in price? Can you eliminate credit to customers and require payment at the time of order? Are you paying ills sooner than required? Have you tried to renegotiate credit limits or payment terms? If you are required to pay COD, try to obtain credit. If you are required to pay bills within 30 days, ask for more liberal net 60 or 90 terms. If you are a good customer, have been meeting payment obligations on time, and you have a rationale, then you may have a convincing case. Look at annual payments such as insurance. Can you change the payment date or spread them out quarterly or monthly? Paying salespeople a commission, after the customer pays is one way of keeping down risk and negative cash flow.
2. CONVERTING ASSETS INTO CASH:
Surplus Inventory Do you have excess inventory that should be placed on sale to free up cash for better selling products? Can any merchandise or supplies be returned for cash or credit? Factoring: Have you tried to sell purchase orders to a factoring agent? Practitioners of this little known source of business financing will buy a purchase order from you at a discount, assuming the customer has good credit. You can find this service using the internet.
3. LEASE VS BUY
LOAN APPLICATIONS:
Developing your loan proposal
Your loan proposal must answer the following questions:
1. Who are you?
2. How much do you need
3. How are you going to pay it back?
4. What happens if you don�¢??t pay it back?
Elements of your loan proposal:
1. Summary: comes first; written last.
This should be clear, concise, accurate and inviting. You want to summarize how the proposed loan will be used, how it will be repaid and how it will benefit your business. Remember, that you are competing with many others, so you�¢??ll also want to point out some of the distinguishing features of your business.
2. Top management profiles:
The key issue here is who are you? Be prepared to come under close scrutiny. You will need resumes as well as a summary of experience, qualifications and credentials for all owners and key members of your management team.
3. Business description:
You don�¢??t need to repeat all of the information contained in your business plan, but you do need to present a solid description of your business, plus a summary of current activities. Make sure you clearly demonstrate that you understand your markets and customers (current trends and risks). Include literature showing your products or services and letters from suppliers, customers and other business references.
4. Projections:
Include projected income statements and cash flow statements for two to three years. Your assumptions should be clearly stated and realistic. Generally, you dont need to show best case and worst case scenarios unless the banker requests them. But do be prepared to answer questions about what happens if some of your assumptions don't come true.
5. Financial Statements:
The loan package must include both business and personal financial statements. Make sure that you fully understand the �¢??story�¢?? that your financial statements tell. Be assured that your banker will fully analyze the statements and calculate the ratios.
6. Purpose of the loan:
Present a detailed statement of how you will use the loan proceeds. Dont forget to include the proceeds of the loan in your cash flow projections (and interest in your projected income statement).
7. Amount:
Remember, that you are offering the bank a deal that will make them money---you are not asking for an allowance. The attitude you should take is to ask,how much money do you need and how much will they lend and not, Will they lend it.
8. Selecting a bank:
You may already have a relationship with a bank, and this is generally the logical first choice for borrowing money. But whether this is your first loan or you are borrowing additional money, you should consider several points before selecting a bank.
Key Questions to ask bankers include the following: 1. Do they have an industry specialty related to yours? 2. What is the average size of their borrowers? 3. What are their professional backgrounds, especially in terms of whether they are commercial or consumer lenders? 4. How long have they been in these positions?
If you are not approved, Where to turn for help: There are a number of resources available to help you prepare your loan proposal, including SBA-affiliated Womens Business Development Centers, Small Business Development Centers, and on-line resources listed at the end of this section.
Online Small Business Resources
Better Business Bureau Better Business Bureaus are private non-profit organizations supported largely by membership dues paid by business and professional groups in each Bureaus' service area. The site includes a resource library, business and charity reports, locations of BBB offices, membership info. http://www.bbb.org
Bureau of Labor Statistics The Bureau of Labor Statistics (BLS) is the principal fact-finding agency for the Federal Government in the broad field of labor economics and statistics. The BLS's Web site includes Monthly Labor Review Online; downloadable publications; K-12 career resources; links to other statistical sites; and Compensation and Work Conditions Online – a resource of information on wages and benefits, safety and health, and labor management relations. http://www.bls.gov
Consumer Information Center (CIC) You've seen this organizationÌs commercials on TV. The CIC's site offers full text versions of hundreds of the best federal consumer publications available. View them for free or you can purchase printed copies at its online ordering site. This site even has a special section for Small Businesses. http://www.pueblo.gsa.gov
Employment Laws Assistance for Workers and Small Businesses (DOL) An interactive system designed to help employers and employees understand and comply with numerous employment laws enforced by Department of Labor, including retirement and health standards; safety and health standards; and wage, hours and other workplace standards. Each elaws Advisor gives advice and provides information on a specific law or regulation based on the user's particular situation. http://www.dol.gov/elaws
Internal Revenue Service Features the "Small Business Corner" – information on starting and operating a new small business; tax info for small businesses; taxpayer help; tax forms and other publications. Check out the "Digital Daily". http://www.irs.gov
Small Business Administration The U.S. SBA (Small Business Administration), established in 1953, provides financial, technical and management assistance to help Americans start, run, and grow their businesses. The SBA's Web site has a wide variety of helpful resources for small business including a "Start-Up Kit" containing tips on getting started, finding the money you need, government regulations, and details on SBA assistance programs. The site's online library has lots of easy-to-understand publications. Bookmark this site for future use! http://www.sba.gov
Social Security Administration The official Web site of the SSA (Social Security Administration). Here you'll find online publications on disability, medicare, and how to apply for benefits. Includes a special section for businesses with employer wage reporting, details on selling to the SSA, vendor payments, and internal agreements. The site's section on current laws, regulations and rulings is a valuable resource. http://www.ssa.gov
Society of Louisiana CPAs The Society of Louisiana CPAs is a non-profit professional association with over 6,600 members statewide. This comprehensive site includes sections for consumers and small businesses. http://www.lcpa.org
U.S. Business Advisor This site is a one-stop electronic link to government for business. The "U.S. Business Advisor" exists to provide business with one-stop access to federal government information, services, and transactions. The site's goal is to make the relationship between business and government more productive. U.S. Business Advisor gives answers to questions that business people frequently ask government. http://www.business.gov
U.S. Chamber of Commerce The site has a special small business section which gives you access to a range of affordable and leading-edge training tools and products developed exclusively for growing businesses at the U.S. Chamber of Commerce's Small Business Institute. http://www.uschamber.org
U.S. Department of Commerce The Department of Commerce promotes job creation, economic growth, sustainable development, and improved living standards for all Americans, by working in partnership with business, universities, communities, and workers. Features CBDNet is the Government's official free electronic version of the Commerce Business Daily (CBD). Also includes links to the Economic Development Administration, Minority Business Administration. http://www.doc.gov
U.S. Department of Labor The U.S. Department of Labor is charged with preparing the American workforce for new and better jobs, and ensuring the adequacy of America's workplaces. Site includes "The Working Partners" program which helps employers develop drug- and alcohol-free workplaces through its Small Business Initiative, Substance Abuse Information Database and Drug-Free Workplace Advisor. Also features Employment Laws Assistance for Workers and Small Businesses (elaws) is an interactive system designed to help employers and employees understand and comply with numerous employment laws enforced by DOL. http://www.dol.gov
