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Preparing to present a small business loan proposal to your lender
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1/31/2008 A Zeller
Preparing to Approach Your Lender
Mission Community Services Corp.
1/31/2008 A Zeller
“What we’ve got here is a failure to communicate!” Cool Hand Luke
Though beaten, Luke refuses to stay down!
1/31/2008 A Zeller
You Speak Different Languages!The Entrepreneur• Risk Taker• Looks to the Future• Numbers = Sales &
Market Share• Product and Sales
Oriented
The Lender• Risk Averse• Looks to the Past• Numbers = Balance
Sheet and P&L• Performance to
Standards
1/31/2008 A Zeller
Don’t Forget the Golden Rule
“He who has the GOLD
makes the RULES!”
1/31/2008 A Zeller
Debt vs Equity Financing
DEBT• A loan• You are charged
fees/interest
EQUITY• A piece of your
business• Purchase or
investment in success of your business
1/31/2008 A Zeller
What Are Your Choices?PERSONAL ASSETS• Savings• Mom & Dad, other family• Friends• Credit Cards• Home Equity Loans
1/31/2008 A Zeller
What Are Your Choices?MICROLOANS ($500 TO $35,000)
• SLO Economic Vitality Corp.• Some Banks & Credit Unions• SBA• Credit Cards• Home Equity Loans
1/31/2008 A Zeller
What Are Your Choices?
SBA Loan Programs SnapshotRemember – SBA is not a direct lender.
What they do is remove some of the risk for your bank/lender.
• Basic 7(a) Loan Guaranty
• 504 Loan Program
• Loan Prequalification
1/31/2008 A Zeller
What Are Your Choices?Other Sources to Consider•Lines of Credit•State Programs•City/County or other Programs•Savings Accounts•Insurance Policies•Refinancing of Assets•Sale of Assets•Venture Capital•Angel Capital
1/31/2008 A Zeller
The Loan Application Process• Chose your lender• Get Acquainted – present your concept/needs• Prepare a formal written proposal & complete lender’s
application• Discuss with lender – address concerns• Timeline can be instant to months, depends on
complexity of the loan• Lender takes your proposal before loan committee• Decision is made
1/31/2008 A Zeller
Parts of a Loan Proposal• Summary• Top Management Profiles• Business Description• Projections• Financial Statements• Purpose – Use of the Loan• Ask for Precise Amount• Repayment Plan
1/31/2008 A Zeller
The Seven C’s of Lender Reviews
1. Credit
2. Capacity
3. Capital
4. Collateral
5. Character
6. Conditions
7. Commitment
1/31/2008 A Zeller
Terms
• Type/Structure of the loan
• Collateral
• Term of loan (time frame)
• Repayment schedule
• Interest rate
1/31/2008 A Zeller
SOURCE AND USESOURCE - Amount You Need
Amount Requested $
Owner's Investment $
TOTAL
USE OF FUNDS
Working Capital $
Equipment & Machinery $
Furniture & Fixtures $
Commercial Real Estate $
Leasehold Improvements $
Debt Restructuring $
TOTAL $
1/31/2008 A Zeller
Financial StatementsBALANCE SHEET• How well is the company
managing its financial resources
• Snapshot of financial condition at an instant in time
• Good match of source and uses of funds
• The business report card!
PROFIT & LOSS STATEMENT
• How well the company buys and sells inventory or services to make a profit
• Reports financial results over a period of time
• Match of revenues and expenses
1/31/2008 A Zeller
Operating CycleThe length of time, measured in days, cash remains in operations before it returns with a profit.
Days Receivable (A/R)+ Days Inventory (Inv.)- Days Payable (A/P)- Days Accrual (Acc.)= Operating Cycle
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Ratios & Liquidity• Liquidity (Current & Quick/Acid Test)• Asset Management• Profitability• Market Value
SLO SCORE Expert - Jim Kiraly!
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Negotiation
• Power in Negotiation
• The Negotiation Process
• What’s in it for the Lender??
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Questions & Answers
Andrea ZellerMission Community Services Corp. @ Creekside Career Center4111 Broad St., Suite A4San Luis Obispo, CA 93401Tel. 805 595-1357Email: [email protected]
Website: www.MCSCorp.org
1/31/2008 A Zeller
Please complete your workshop evaluation before you go!
