West Points

Tuesday, February 22, 2011

Show me the money?

By Heather Gurewitz
Mendocino Women's Business Center Director

There has been a lot of buzz in the news lately about financing, SBA loans, non-profit intermediaries, and getting businesses the capital they need. Locally, a number of loan and alternative financing opportunities are available for local businesses looking to start, grow, and expand. From micro-loans to SBA 504 loans, there are a lot of opportunities. So, how do you decide what to pursue. Here are some basic guidelines to follow:

First off, this isn't "easy" money. Anyone looking to get even a micro-loan must demonstrate that they are financially responsible and will be able to pay back the loan. If it is an existing business, they should have three years of financial statements, showing good profit margins and ability to take on new debt. If it is a start-up business, they should have a well thought-out business plan with 2 years of financial projections with good back-up information to justify the numbers.

Most people assume the first step is to go to the potential lender, but if you don't know how much you need or how much you can pay back, you are wasting time (yours and theirs). Start with a business plan. Unless it is a personal loan and you are collateralizing personal assets with a commercial bank or credit union, your lender is going to require this, and you are wasting time trying to get money without it. Does this sound scary and intimidating? We can help.

Once you know how much you need, it's time to "go shopping." Getting a traditional commercial business loan right now is still a tough, but some alternative financers can't work on a package unless the loan has been turned down by a regular bank, so it may still be worth asking. Depending on where the funds are from, terms will vary greatly. For example, some Community Development Block Grant (CDBG) Program loans range at 2%-5% interest for a micro-loan, whereas an SBA Community Express loan is going to be at about 7% with traditional banks coming in around 8-9%. (these are examples not actual numbers). Also, the terms are different, as well as the processing time frame, and requirements. (Another reason you should visit with us first, we can help guide you through the programs that are out there so you can make an informed decision about which one to pursue.)

Special note: If you have or will start a business in the City of Fort Bragg, you may be able to take advantage of the City's CDBG MicroLoan program which offers loans up to $15,000 for start-up or expansion of existing businesses. The terms on this are variable, and the loan fund is designed to assist those with low or moderate income. For more information about this program contact Heather at 964-7571.

Now it's time to actually fill out the loan applications and start developing a relationship with the lender. If you can go to them organized and ready to answer questions and support your request, it is much more likely that they will want to lend you their money and consider you a lower risk (which usually means better terms).

If you are thinking about getting a small business loan, a West Company consultant can provide neutral and objective expertise to help guide you through the process and find the option that will build success in your business. Our consulting services are covered by our funders and there is no cost to our clients. Click here to get started!

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