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F. Leroy Pacheco, Executive Director, The Loan Fund<\/p><\/div>\n
People often ask, \u201cWhat do I really need to get a loan?\u201d<\/p>\n
They have reviewed the various bank programs, surfed the Internet, talked to friends and attended seminars.\u00a0They may be drowning in information but they are still unclear about what to do next.\u00a0How, exactly, does one go about getting financing, without having to sign over the rights to a house, a car, or as the joke goes \u2013 a firstborn child?<\/p>\n
It all starts with an idea.\u00a0But it\u2019s the planning associated with turning that idea into a viable business that is the most important factor and one of the keys to whether or not a loan will be awarded.<\/p>\n
Before you talk to a banker, a venture capitalist or an alternative lending group such as The Loan Fund, you need to do some thinking. \u00a0Don\u2019t worry about doing a full-blown business plan \u2013 yet.\u00a0Ask yourself these seven questions.\u00a0We will certainly ask them if you call us about a loan.<\/p>\n
Is your idea a good one?\u00a0You love it, but will anybody else? \u00a0Why would someone who doesn\u2019t know you buy your product or service?<\/p>\n
How are you going to reach your target customers?\u00a0We often see plans that include \u201cadvertising\u201d as the sole marketing tactic.\u00a0There\u2019s a lot more to marketing than advertising.
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What are your potential customers already doing?\u00a0Whatever your idea, your potential customers are already doing something to solve the problem or fill the need.\u00a0Why would they change to you?<\/p>\n
Have you considered the future?\u00a0The location of your new store may be great now, but what happens if the city decides to do major road construction?<\/p>\n
Are you realistic about costs?\u00a0One of the top reasons entrepreneurs fail is undercapitalization. They simply don\u2019t have the money to carry out the plan.\u00a0It\u2019s like renovating a house; it always takes twice as long and three times as much money as the original estimate.\u00a0Plan your business accordingly.<\/p>\n
What is your worst-case\/best-case cash flow estimate? How much money are you going to have coming in and going out each month?\u00a0Do you have enough cash to cover expenses until revenue becomes a steady stream?\u00a0It takes time for a business to really get going \u2013 word has to spread, customers have to keep buying and you have to live through unforeseen events.\u00a0It\u2019s not unusual for to a start-up to take two to three years to become profitable.<\/p>\n
How will you pay back the loan?\u00a0Be honest with yourself.\u00a0Optimism is great; naivet\u00e9 isn\u2019t. Saying \u201cit will somehow all work out,\u201d doesn\u2019t help your case with lenders.<\/p>\n
Congratulations!\u00a0You have just roughed out your first business plan and are now prepared to talk about financing.\u00a0This brings us to your first meeting with a lender.<\/p>\n
When you meet with a lender, be prepared for some personal questions.\u00a0We will look at your credit score and your tax returns.\u00a0If you have had problems in the past, it doesn\u2019t necessarily mean you won\u2019t get a loan, but you must be prepared to explain the circumstances.<\/p>\n
We also look at earning history.\u00a0For example, if someone with an existing business is projecting revenues of $300,000 and the business has never made more than $50,000, we need to dig a bit more into the business plan.\u00a0What will be different this time?\u00a0If you have an existing business, we will also ask to see balance sheets and income statements.<\/p>\n
Last, but certainly not least, we will be looking for that intangible asset called passion!\u00a0The gleam in your eye goes a long way toward compensating for lack of experience.<\/p>\n
Both knowing where to look and being prepared are essential to the success of getting a loan or finding equity to grow or start a business.\u00a0<\/p>\n
Learn more about The Loan Fund<\/span><\/strong><\/a>.<\/p>\n Download 4_New Business Startup Loans PDF<\/a><\/p>\n","protected":false},"excerpt":{"rendered":" Seven questions to ask yourself when thinking about starting a business. Continue reading