1. Managing Credit Gonzalo Manchego Duquesne University SBDC

2. Managing Credit Which are the main sources of capital for the business? Why is credit important for my business? Do you know your personal credit score? Do you know how lenders rate your personal credit score?

3. Sourcing of Financing ∎ Personal Resources or Family/Friends ∎ Grants ∎ Outside Investors ∎ Angels ∎ Venture Capital ∎ Stock Offering ∎ Loans ∎ Government Programs Including SBA, Counties, Cities, CDC’s ∎ Banks and Other Financial Institutions ∎ Personal Credit – Smaller loans ∎ Business Loans or Lines of Credit ∎ Seller financing

4. Why is credit important? ∎ Equipment ∎ Inventory ∎ Working Capital ∎ Real Estate & Renovation ∎ Purchase of Existing Business 10- 20 years 7 years (or less for working cap & inventory } } ∎ Generally a loan will cover:

5. Loan Applications ∎ Business Plan &... ∎ Two to Three Years of Financial Projections ∎ Monthly for first year ∎ Monthly or quarterly second & third years ∎ Past Income Tax Returns ∎ Personal Financial Statement

6. Loan Applications ∎ The Five Cs of Credit Review ∎ Capacity (financial projections) ∎ Conditions (market) ∎ Capital (equity) ∎ Collateral (business & personal assets) ∎ Character (credit, management abilities)

7. Do you know your personal credit score? 47% of Americans don’t know their credit scores. 3 major credit reporting agencies: – Equifax – Trans Union – Experian Low credit scores can limit your borrowing power

8. Credit Scores - FICO 850 – 740 : Excellent. Mortgage: 3.034% Auto Loan: 3.321% 740-700 : Good. Mortgage: 3.256% Auto Loan: 4.754% 699-641: Average. Mortgage: 3.647% Auto Loan: 6.795 % 640-500: Bad. Mortgage: very hard Auto Loan: 15.6% 500-300: Very Bad. Mortgage: Impossible Auto Loan: 17%