The Basics Of How To Run A Successful Business - The Bottom Line
When putting together the business plan, it is very important to get as much detailed information as possible. With companies, you've got to be detail oriented. Detailed information will assist in a timely approval of the loan. When fielding information for your competitor analysis, try calling competitive companies and questioning them like you are a prospective client.
Other details to include are:
- When doing a market analysis, assume that when you open your doors you'll be at minimum capacity. Some companies overestimate this number and don't include money to cover working capital until the company reaches to breakeven.
- Make sure to include an advertising expense.
- When making an acquisition, include financial statements and a current interim statement within 90 days of the application. For an acquisition, looking at the existing financials, how well that business is doing, operating income size, and gross revenue.
- For new companies, allocate 1.5 times what you think is it is going to take to build the company and add on 15%. Most people think they can build in six months. They're wrong. Always add a 10% contingency fund in order to allow for changes in the project scope.
Considerations For Bottom Lines
After you have collected all of your information, take a step back and calculate how much money and time that will be included in paying back the loan. You have to look at what you are financing. The amount of time to pay back the loan should be calculated in your business plan and can be worked out with your loan officer. So what loan is best for you?
There are several loans that are accessible from SBA. Here are some of the descriptions of what's most popular for small businesses:
7(A) Loan Guaranty Program:
The 7(a) Loan Guaranty Program is acknowledged as a primary SBA lending program. It supplies loans to the small business owner who is not able to obtain financing on even remotely reasonable terms via the conventional lending channels. The 7(a) program functions through a group of private-sector lenders which fund the loans, which are fully guaranteed by the SBA due to the fact that the agency does not handle funds intended for direct lending or non repayment grants.
For most SBA loans there is no legislated limit to the total amount of the loan that may be requested from the lender. Keep in mind that the maximum amount that the SBA can guarantee is usually one million dollars. Thus, with a lender requesting the maximum SBA guarantee of 85%, the total loan amount available under this program generally would be limited to around $1 million. However, there are some exceptions in the specialized loan programs.
SBA considers the borrower's repayment ability from the cash flow of the actual business a main point in the SBA loan decision procedure along with many other considerations. All owners of 20% or more must personally guarantee the loans they receive from the SBA loan program.
SBALowDoc Loan Program:
The maximum loan for this program is $150,000, but if money is needed quickly, this program will get you a response from the SBA within 36 hours of the complete application. It allows a SBA guarantee of up to 80% for loans up to $100,000, and up to 75% for loans over $100,000 up to $150,000, although these levels do change.