Starting a business often requires getting a loan. But banks, still spooked by the 2008 Wall Street collapse, are skittish about forking over money to entrepreneurs, no matter how small the amount.
One consistent conduit to capital for entrepreneurs has been the Small Business Administration, which backs up millions of dollars every year from lenders to start-ups. But though the SBA might be there to help get you off the ground, but you need to show the agency that you have a viable business plan and some start-up funding of your own before it will back you.
Onica Browne, a lender relations specialist with the U.S. Small Business Administration’s New Jersey District Office, will explain the ins and outs during a free seminar on Thursday, May 12, at 6:45 p.m. at the Hamilton Township Library. The event is part of an occasional workshop series sponsored by SCORE Princeton. Call 609-393-0505.
There are many different formats for a loan proposal. Browne suggests contacting the lender you plan to approach to find which format suits you best. Also, when writing your proposal, don’t assume a lender is familiar with your industry or your individual business. Always include industry-specific details so the lender can understand how your particular business is run and what industry trends affect it. The SBA also wants to see documents that show you’re serious.
Executive Summary. The SBA suggests beginning your proposal with a simple, direct cover letter or executive summary that explains who you are, what your business background is, what the nature of your business is, how much you want to borrow and what you plan to use it for, and how you would like to pay it back.
Business Profile. When describing your business, make sure to include its type, location, product or service, and a brief history of the company. If you are already in business and seek a loan to help carry your business through some growth, be sure to include information on annual sales, number of employees, proposed future operations, competition, customers, and suppliers.
Loan Repayment Provide a brief statement indicating how the loan will be repaid, including repayment sources and time requirements, cash-flow schedules, and budgets.
Make sure to list real property and other assets to be held as collateral. Few financial institutions will provide non-collateral-based loans, and all loans should have at least two identifiable sources of repayment. The first source usually is cash flow, the second is usually collateral pledged to secure the loan.
Also include personal financial statements listing all personal assets, liabilities, and monthly payments. These statements should not be more than 90 days old.