Finance Your Own Business. Garrett Sutton

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СКАЧАТЬ need to describe your business, your competitors, your challenges, your plans for borrowed funds, your plans for loan repayment, your projections for the near future of the business, and your collateral.

      You may also be asked by your lender to provide a lease, franchise agreement, purchase agreement, articles of incorporation, plans/specifications, copies of licenses, letters of reference or intent, contracts, or partnership agreements.

      The SBA Loan Application Checklist is an 11-item list of forms and documents you’ll need to provide to your lender as part of the process:

      1. Your SBA loan application (SBA Form 4)—may be downloaded from SBA.gov

      2. Personal background and financial statement—SBA Form 912 (Statement of Personal History) and SBA Form 413 (Personal Financial Statement)

      3. Business financial statements—a current profit-and-loss (P&L) sheet and a detailed, one-year projection of income and finances, attached to an explanation about how you intend to meet this projection

      4. Ownership and affiliations—names and contact information for anyone holding a controlling interest in the business, subsidiaries, or affiliates

      5. Business certificate/license—original business license or certificate to do business

      6. Loan application history—records of previously applied-for loans

      7. Income tax returns—personal and business for all principals for the last three years

      8. Resumes—for each principal or member of the management team

      9. Business overview and history—a brief history of your business and its challenges, including an explanation of why you need the loan

      10. Business lease—either a lease or a note detailing the terms of the lease from a landlord

      11. Items for purchasing an existing business—if your loan would be for the purchase of an existing business, you’ll need a current balance sheet and P&L of business to be purchased, its previous two years of income tax statements, a proposed Bill of Sale, and the asking price (with details about schedule of inventory, machinery, furniture, etc.)

      To be sure, applying for an SBA-backed loan can be a lengthy, sometimes frustrating process. It certainly points to the need to have a solid business plan and detailed financial records.

      And because lenders set their own requirements (within the context of SBA guidelines, of course), this also means it may make sense for you to work with a company that can help you find the right SBA lending partner.

      The Downside of SBA Loans

      An SBA loan that helps your business grow is terrific, but if you run into tough times, one of these loans can turn into a nightmare. That’s because the same federal guarantee and collateral requirements that make these loans work can work against the borrower.

      SBA loans almost always require a personal guarantee from the principals of the business. And for many loans, the borrower must pledge all available capital. That means, for example, if you have equity in your home you will likely have to pledge that collateral for the loan.

      Though the federal government guarantees most of the loan, that guarantee is designed to protect the lender—not the borrower. When a borrower defaults, the government doesn’t just hand the lender a check and walk away. Instead, there will be a serious effort to collect as much as possible. Collection efforts are almost always handled by the lenders themselves and may include:

      1. Trying to collect from the owner of the business, who in most cases provided a personal guarantee. If necessary, they may sue the business and/or person(s) who agreed to be personally liable for the debt and get a judgment, which opens up new avenues for collection.

      2. Foreclosing upon or repossessing any collateral pledged for the loan, including personal assets (a home, for example) and/or business assets (equipment, inventory, etc.).

      If you fall behind on an SBA loan, reach out for help. You may be able to settle the debt for less than you owe, or renegotiate the terms while your business gets back on its feet. Your attorney, CPA or a firm that helps business owners in distress may be able to assist if you can’t do this on your own.

      Another option may be bankruptcy. While it may not be ideal, it may give you the fresh start you need to regroup and try again.

      Keep in mind that if you default on an SBA loan you personally guaranteed you may receive a 1099-C reporting the cancelled debts as “income,” which could create a whole new set of problems. Since forgiveness of debt is income you now owe the IRS on that “income.” Be sure to discuss this issue with your accountant or CPA if you fall behind on your loan.

      Maybe a smaller loan is best for you…

Chapter 5

      Think Small: Microloans, CDFI’s and Credit Unions

      Carlos was recovering from spinal surgery. When it became clear that he couldn’t return to being a painting contractor, he needed to find another career. After reminiscing about food trucks at a party, Carlos and his wife Maria drew up plans for a ‘tricked out’ truck with pin striping and a rockin’ stereo system. They took their plan to a regular bank, but didn’t get very far. In fact, the bank didn’t get it and told Carlos and Maria that they were too much of a risk.

      They were referred to a non-bank micro-lender by a friend. When Maria and Carlos presented their idea to the micro lender they got it and loaned the couple $35,000. “They didn’t laugh,” said Maria. “They went all the way with us which was so cool. During the first year, we called our rep. ‘We are struggling, and we don’t know what to do’ and they were always supportive. We wouldn’t still be here without our lender in that first year.”

      Carlos and Maria specialize in Tex/Mex food and they cater corporate events and street festivals. They became so successful that they went to CDC Small Business Finance for a bigger loan to pay off the first loan and buy another truck. They now have three trucks and are looking at a fourth, have two employees besides themselves and hire lots of independent contractors.

      For many banks, especially regional or national ones, a very small loan to a very small business simply isn’t profitable. However, one of these loans—often dubbed “microloans”— can make or break a new venture. That’s where microlending organizations come in.

      Usually, things that would be problematic in traditional loans—a bad credit history or lack of collateral, for example—aren’t necessarily strikes with microlenders, who not only provide loans of up to $50,000 but will also provide training and mentoring to borrowers. If you want microloan funds, you must be prepared to fulfill their training and planning requirements before they’ll even consider your application.

      Microloan program loans are offered to small business concerns and certain not-for-profit childcare centers. Designed for survival-mode businesses, microloans aren’t intended for paying existing debts or purchasing real estate. They may be used for the following:

      • Working capital

      • Purchase of inventory and supplies

      • Purchase of furniture and СКАЧАТЬ