Finance & Capital

5 Tips for Writing a Business Plan For a Loan

Get these tips from SCORE for developing a plan that helps you secure funds for your small business.

1. Begin with a statement of purpose. You should be able to explain your business in 25 words or less.
2. Tell how your business will work and why it will be successful. List the owners.
3. Fill in the business details. Describe its products or services, the customers, the market and the competition. List the managers and their credentials.
4. Supply three years of projected financial statements. Include income, loss, and cash-flow projections.
5. Provide supporting documents, such as references from creditors and potential clients and suppliers, evidence of insurance and the like.

5 Tips on Approaching Your Bank

It’s unwise to walk into a bank unable to answer some tough financial questions about your small business. Get these tips from SCORE on how to prepare for your banker before you ask for financing.

1. Understand that your primary responsibility is the proper use of capital and that you are in business to make a profit.
2. Test the economics of your product or service. Make sure that it is profitable and that the gross profit percent is in line with that of the industry.
3. Know how you will finance your business. Visit lenders (banks) prior to seeking financing to gather information. Ask your lenders what they will want to see before you apply for a loan.
4. Develop a personal financial evaluation. Determine your net worth and your annual, personal cash flow needs.
5. Develop realistic financial forecasts for income statements, cash flow and balance sheets for three years. Forecast monthly for the first year.

5 Tips on Conserving Capital

Managing cash flow is difficult for many small business owners. Get these tips from SCORE on how to keep a handle on your business’s cash and capital.

1. Determine your primary business of units sold, customers sold, average order, hours billed, etc. Know what drives your business.
2. Pricing should be determined by the sum of product costs, service costs, image of the business, direct and indirect costs and a reasonable profit.
3. Conserve capital. Do not commit cash or capital until necessary. Don't buy services before you need them.
4. Lease instead of buy when it makes sense.
5. Look for office equipment that can do double duty, for example a fax machine that can also make copies.

5 Tips on Factoring

Get these tips from SCORE on determining whether factoring is right for your small business.

1. Know what the term means. It’s a way to turn your accounts receivable into cash by selling them to a finance company called a factor.
2. Make sure you understand the fees you will pay for this service. They typically include the cost of funds and making the collections.
3. Balance the cost against the gain. Factoring can be expensive but it may fuel your growth, improve cash flow, or enable you to take advantage of supplier discounts.
4. Ask your bank or CPA to recommend factors. Check their references.
5. Visit www.cfa.com, the Web site of the Commercial Finance Association, and the International Factoring Association at www.factoring.org for a list of factors. The CIT Group site, www.cit.com, provides information on factoring (click on “Business Financing,” then “Commercial Finance,” to access the search feature).

5 Tips on Financial Packages

Get these tips from SCORE on securing financial packages to fund your small business’s growth.

1. Understand that loans and venture capital often come in packages—that is, each may have several sources of funds and one piece of financing may depend on another.
2. Recognize that even government programs may require several sources. Under the federal 504 loan program, funds might come from a certified development company and one or more banks.
3. Expect to come up with some cash yourself. A down payment or demonstration of willingness to risk some of your own capital may be required.
4. Be sure you understand what’s expected of you. For example, does a government program expect you to employ a certain number of workers within a certain time period?
5. Be patient. When more than one financing institution is involved, there’s more paperwork, and each institution must give its approval.

5 Tips for Finding and Keeping a Bank

Choosing a bank for your small business accounts can mean the difference between success and failure when times are lean. Take a look at these tips from SCORE to help you make the right banking decision.

1. Understand the basics. Large or small, banks are interested in the same fundamentals—such as cash flow, collateral and the viability of your business.
2. Sell the bank on your company. Provide solid information on its financial history, your business plan, and information about the kinds of loans you need and the terms you want.
3. Look for a good fit. Let prospects know what kind of a relationship you want with a bank.
4. Ask the right questions. Find out where decision making takes place, how many people you will have to deal with, and if the bank is open to meeting with you and your advisors fairly regularly.
5. Commit time and energy to developing your relationship with the bank you choose. Get to know more than one person at the institution so that if your bank is merged or acquired, someone familiar with your business will probably still be there.

5 Tips on Finding Angel Investors and Venture Capitalists

Nearly all small businesses need funds to really get off the ground. Get these tips from SCORE on finding investors or angels to finance your small business.

1. Do some research. Identify the most likely candidates by asking your accountant, banker and lawyer.
2. Keep an open mind—potential investors may be anywhere. According to Success magazine, one entrepreneur found an angel investor among the motorcyclists he rides with on weekends.
3. Surf the Web. Good places to start are www.nvca.org., the Web site of the National Venture Capital Association and www.mavf.com., the site of Mid-Atlantic Venture Funds, a venture-capital firm in Bethlehem, PA.
4. Make presentations at venture capital forums or fairs. Your local university business school or Small Business Administration office should have information on such events.
5. Check your library or the Web for such references as Pratt’s Guide to Venture Capital Sources and The Directory of Buyout Financing Sources, both published by Thomson Financial Securities Data at www.tfsd.com.

5 Tips to Get Great Talent for Less Money

Get these hints from SCORE for finding great employees without busting your budget.

1. Consider immigrants. Many are talented people who will accept less pay because they don’t speak English. (But pay them fairly!)
2. Keep an eye out for displaced “Mommy Trackers”—smart women who’ve left corporate executive positions to start a family or be closer to their children. They can make excellent part-time executives.
3. Investigate employee-leasing and temporary-help services.
4. Offer internships and part-time challenges to graduate students and upper-level undergrads. They want to get experience and can bring excellent knowledge and skills.
5. Get referrals from employees—and don’t be afraid to hire relatives of good workers. You can save substantially on recruiting costs this way.

5 Tips to Creatively Search For Funding

Nearly all small businesses need cash to get started. Get these quick tips from SCORE on where to look for funding sources for your business venture.

1. Contact your state, county and local development departments. Many offer funding programs to foster business within a certain geographic area.
2. Take advantage of organizations aimed at helping you. The National Organization of Women Business Owners offers special funding programs for women entrepreneurs, for example, and the National Minority Supplier Development Council has an arm that works with minority entrepreneurs.
3. Call on the community banks in your area. These smaller banks pride themselves on helping small business owners.
4. Find out of there are any revolving loan fund (RLF) programs for which you might qualify. They provide “gap financing” that your bank won’t or can’t offer. Your banker should know of any RLFs available.
5. Visit www.sba.gov/financing, the finance section of U.S. Small Business Administration’s Web site. It provides details on SBA’s many funding programs. Perhaps you qualify for one.

5 Tips on State and Local Funding

Think creatively when you are looking for financing for your small business. Here are some tips from SCORE on how you might find local funding.

1. Don’t overlook city, county or state governments when you seek capital. Many economic development offices have funding-assistance programs for qualified small firms.
2. Understand the purpose and the requirements of the program you’re interested in. It may call for raising matching funds or creating jobs.
3. Be modest in making projections. For example, don’t inflate the number of jobs you think you can generate in hopes of getting a larger grant.
4. Take advantage of “in-kind” credits. Like cash, these can be used as matching funds. In one case, a state program counted a company’s $200,000 local property tax abatement as part of the matching requirement.
5. Remember that having a good business plan and strong management team in place will help you make your case.

5 Tips on Vendor Financing

Get these tips from SCORE for establishing a relationship with vendors that will help the cash flow of your small business.

1. Know that vendors can sometimes play a significant role in financing a new business. Partners in one start-up persuaded vendors to give them net-30 terms in order to stock a retail store. They made enough money to pay the vendors back in 30 days.
2. If you need financing for equipment or supplies, ask your suppliers first. They may be willing to work out an arrangement with you to keep you as a customer.
3. If you haven’t established vendor relationships, shop around. Your trade association may be able to point you to suppliers that offer financing.
4. Check the vendor’s credentials and reputation before you sign an agreement. Look for stability.
5. Keep in mind that a number of major suppliers own financial companies that can help you, such as GE Small Business Solutions and IBM Global Financing.