Small Business Start Up Capital Access Primer and Key Steps

small business capital access

Start Up Handbook series part 2  Capital Access Primer and Definitions

 

This is part two on Capital Access of a ten part series for start ups and new entrepreneurs.

Part one entitled Making it Legal addressed Establishing a Legal Entity – Understanding the Advantages and Disadvantages of the various types of Legal Entities

Part two will provides insights on: 

  • Financial Services Needed – Addressing the issues and the options
  • Do You want to Access Capital?  What you need to Know
  • Your Personal Credit Score –  What you need to know and what you can do about it.
  • Preparing an Income Statement for Your Business
  • Do You Need to Raise Capital?
  • How to Access Capital for Your Growing Business
  • Check your credit score. Address the issues. Use a 680 credit score as your goal

Major credit issues  that adversely  affect your credit standing are:

  • Bankruptcies
  • Foreclosures
  • Short sales
  • Loan modifications

Other Factors that Impact  Your Credit:   

  • Past Delinquencies -35%
  • Debt and Ratios  – 30%
  • Average Age of File -15%
  • Mix of Credit Types – 10%
  • Inquiries  – 10%

And Then What?

  • Improve your elevator pitch
  • Establish a relationship with a business banker before you need to access capital
  • Attend networking events, interview lenders. Open a business account
  • Prepare a strategic plan that includes an action plan (A traditional business plan is not required)
  • Create a team that meets periodically to review your progress and problems.

The team would include

  • Owners and senior management
  • Your  attorney
  • Your accountant
  • Your marketing specialist
  • A mentor or a coach  and possibly an advisory board

How Bankers Look at Borrowers –

Being Bankable -How to Establish a Relationship with a Banker

Whether you are applying to a bank for a line of home equity credit, a line of credit for business working capital, a commercial short-term loan, an equipment loan, real estate financing, or some other type of commercial or consumer loan, many of the same basic lending principles apply.

The most fundamental characteristics a prospective lender will want to examine are:

  • Credit History of the Borrower
  • Cash Flow History and Projections for the Business
  • Collateral that is Available to Secure the Loan
  • Character of the Borrower
  • Loan Documentation

When reviewing your loan application, lenders look for good credit, a feasible business plan, adequate owner equity and sufficient collateral. Perhaps most important, they look for management expertise and commitment. What real world experience do you and your key partners or employees have in managing this type of business?

Here is what you’ll need for a bank loan application:

  • Cover letter of introduction
  • Summary of financial needs (Source and Use of Funds)
  • Business financial statements (Not less than 2 years)
  • Business tax returns (Not less than 2 years)
  • Projected cash flow statement (Not less than 12 months)
  • Collateral (both business and personal)
  • Personal tax returns (2 years)
  • Personal financial statements
  • Résumé

The lender will also ask:

  • Are there any legal claims, liens or judgments against you or your business?
  • Are any assets pledged?
  • Are your tax returns and payments up to date?
  • Do you have any life insurance? If so, what is the face value or the cash value?
  • What are your monthly household income and expenses?

TIP: Your credit score is crucial to your startup’s financial success. Since your new business does not yet have a track record, banks will consider your personal credit score in making lending decisions or opening business accounts. Vendors, suppliers and potential partners will also assess your personal credit score before extending credit or doing business with you.

Next- THE SIX C’S OF CREDIT – SOMETIMES REFERRED TO AS THE THREE C’S OF CREDIT)

RELATED POSTS

How to Get Newsletter Readers Hitting “Open” Every Time

How to Get Newsletter Readers Hitting “Open” Every Time

12 steps to the Art of the Irresistible Monthly Newsletter Let’s take a break from the “convert” talk for a second and focus on building genuine connections through monthly newsletters your readers look forward to every month. After all, happy readers are more...

How Will AI Affect the Role of the Salesperson in Business?

How Will AI Affect the Role of the Salesperson in Business?

 5 ways it could it have an impact on Hispanic culture As a salesperson in the mid 1980’s in the automobile business there was great fear first that Car and Driver, Motor Trend, and Consumer Reports were going to provide the consumers with  too much information, and...

Women & Men, Career, Life & Their Choices

Women & Men, Career, Life & Their Choices

Tips and Observations, Inspired By "Makers: Women Who Make America" Watching a recent PBS broadcast "Makers: Women Who Make America" was a moving experience for me. Whew, I didn't realize how much time had gone by. Many of the stories and events described in the...

Video Gallery

Polls

Sign Up for the Latin Biz Today Newsletter

PR Newswire

Featured Authors

Innovation & Strategy

Money

Talent/HR

Legal

Marketing

Culture

Fashion

Food

Music

Sports

Work & Life

Mindfulness

Health & Fitness

Travel & Destinations

Personal Blogs

Pin It on Pinterest