These nine steps willĀ enhance the level of successĀ inĀ securing small business financing
Preparation is jobĀ one before seekingĀ financingĀ in all its various forms. These willĀ serve as a guide to help achieve aĀ financingĀ goal.
Step 1:Ā
Check yourĀ credit score. Address the issues. Use a 680-credit score as your goal
Major credit issues that adversely affect your score are bankruptcies, foreclosures, short sales, andĀ loanĀ modifications
How your credit score is impactedĀ Ā
- Past Delinquencies –35%
- Debt Ratio – 30%
- Average Age of File -15%
- Mix of Credit Types – 10%
- Inquiries – 10%
Step 2:
Improve your elevator pitch
A quick and concise description of what your business uniquelyĀ creates and delivers to its clients
Step 3:
Establish a relationship with a business banker before you need to access capital
- Attend networking events, interview lenders.
- Open a business account
Step 4:
Prepare a strategic plan that includes an action planĀ (A traditional business plan is not required)
Step 5:
Create a team that meets periodically to review your progress and problems.Ā
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
Step 6:Ā
Prepare financial information including:
- Profit and Loss Statement and Balance sheet – Update Quarterly.
- Accounts Receivable and Accounts Payable – Update Monthly
- A current schedule of existing debt – with payments and interest rates Update Monthly
- A current Personal Financial Statement for all owners of company with an interest of 20% or greater
Step 7:
Tips andĀ Questions to be Answered by you
- Know your Breakeven (How many sales per month to cover your operating expenses)
- Do you meet lenders 3 Cs requirement? – Credit, Collateral, Cash Flow
- Do you understand what an SBA guarantee can do for you?
- Match your funding requests with appropriate timelines
- Create a path from yesterday to tomorrow. Your history is as important as your future (cash flow projections)
- Know your industry and your market
- When you are ready, prepare an executive summary as a sales tool that highlights the strengths of your business.
Step 8:
Learn where to go to seek funding to meet your needs.
Select the best option for your company:
- Commercial Banks
- Savings and Loan Associations
- Thrift Associations
- Micro lenders
- Factor Companies
- Private Foundations
- Asset Based Lenders
- Crowd Funding
- Angel Investors,
- Venture Capital Funds
- Credit Cards
- Pay Day Lenders
Step 9:
Obstacles to address in today’s business environment
- Compliance Issues in your Industry
- High Cost of Real Estate
- Insurance Requirements
- Credit Issues
It’s imperative that small business owners understandĀ theirĀ market and the various segments (generations) and new residents from other countries
