Financing Made Easy Presented by Sue Malone Principal, Strategies for Small Business or

Who Needs Money?  Money is an essential ingredient of an enterprise at every level. Whether it is a life style business or entrepreneurial  Money is needed at every stage of business development  Start–up businesses  Mature businesses – need financing to stay on the cutting edge  Debt financing vs. equity financing

Are You Ready? Increasing the chances of obtaining business financing

What Traditional Lenders are Seeking It’s all about cash flow and credit Key points Businesses cash flow Credit ratings of the principals of the business

“A yawning gap has opened in the early stages of the economic recovery between big companies and small businesses with the former enjoying access to credit and growing global markets and the latter hurting badly on both fronts” Source: Wall Street Journal March 11, % of all U.S. businesses are firms with less than 10 or fewer employees Source: US Dept. of Labor 1.8 million new small businesses start every year Source: Us Dept. of Labor 41% of small businesses can’t get the funds they need – up from 22% in 2008 Source: Bloomberg.com, National Small Business Association 80% of small businesses say they’ve been affected by the credit crunch Source: National Small Business Association New small business loans declined 33% in 2009 alone and continue to decline especially to women and minority owned businesses. Lowest it has been all century. Source: Federal Financial Institutions Examination Council Current interest rates are targeted for big business and big banks. The fed’s are looking for large businesses to hire – it is all about jobs. However, the real employers are the small business and until they figure that out the job market will stay slow.

Additional Items  Collateral – what is collateral and how much is needed  Cash injection in the business  Track record in business

State of Banks in 2016  Highly Regulated  Conservative  Risk-averse  Historical data  Portfolio  Payment = principal and interest  Length of time on payback of loan  Where is Main Street?

If I am told “No,” What are my Options?

Other Options 1. There is more than one bank in the community 2. SBA programs 3. Non bank lenders 4. Credit Cards 5. Vendors 6. Family and Friends 7. Angel investors 8. Crowd Funding 9. What is new in 2016?

Part 2. Step by Step Approach Of obtaining a Small Business Administration loan

How Can SBA Help my Business? SBA was established to help small businesses obtain the capital they need to start or grow a business. SBA partners with lenders to mitigate the risk of the loan. The SBA guarantee helps the small business owner with the lack of collateral. Cash flow lender

Myth vs. Fact Myth – SBA is the direct lender Myth – have to be rejected by 3 lenders to qualify for a SBA loan Myth – lower interest rates Myth – sub prime lender Fact – SBA loans are made by banks, and non bank lenders licensed through SBA Fact – terms are usually longer than a commercial loan Fact – rate perimeters are set by SBA Fact – must be a for profit legal business

Which SBA Loan is Best for my Business? 504 – real estate 7(a) –Express –Veteran Advantage -- what is this actually? –Export Express –Newest programs Small lender Advantage Community Advantage

Loan for Veterans, a Huge THANK YOU for those who have served

Export Express

Part 3. Navigating the Process Of a SBA Loan

Where Do I Find These Lenders? Local active community banks Larger banks who want to increase their portfolio of small business Referrals National Licensed lenders Right HERE! You came to the right place!!

Now that I Found the Lender What is Next?

Preparation Develop a business plan or executive summary Understand the reason why the loan is required and how it is going to be paid back. Determine the loan amount needed.

Paperwork? SBA loan application –May be lenders own loan forms –SBA loan application –Hybrid

Additional Documentation Ownership formation Cash infusion or cash injection Collateral Business plan Financials Lease Personal guarantee Other pertinent business items

Is Capital Available Through SBA ? We hear every day how lending is down and only available to existing businesses. Can I obtain it? Is it available to start ups?

Common Elements of Debt Financing  Debt financing governed by a loan agreement – promissory note  A fixed credit limit or a formula that sets available borrowings based on a percentage of receivables, inventory, etc.  Statement on how the funds will be used  Collateral description – UCC filings  Personal guarantees  Initial interest rate, an adjustment formula  Fees charged by the lender  Time period of the loan  Reporting requirements  Representations and warranties

Answers -- There are lenders still making loans to emerging and existing business. YES to all of the questions!

How Long does the Process Take? Working closely with lender speeds up process Missing items slows down the process PLP lender can make decision within lending organization on approval of loan Loan number obtained by lender Loan is funded

Timing

Is Now! What are my next steps? Execution

Other Forms of Financing Equityand Crowd Funding  Family and Friends – fast and easy  Angels will do early stage  Linked in to experts  Bringing in partners, advisors or board members  Venture Capital  Hybrid – Crowd Funding  New rules –  Equity position  Investigate site  Build crowd  Preparation  Time Frame  Cost Credit card, Leasing & Vendor  Fast  Easy (bit more difficult now)  No collateral  Zero interest rate  Interest rate can become expensive  Credit limits changed quickly  Effect personal credit score  Leasing, Vendor  A bit tougher in this current market for start ups– still available  Strategic suppliers  Lease Financing  Higher costs interest rate  Equipment  Typically fast  Usually equipment is collateral

Questions ?

Key Takeaways Money is available for small businesses This includes start ups Now is the time! Never give up! Believe in yourself and your business

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