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Financing Your Small Business
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Financing Your Small Business
• Types of Funding
• General Requirements
• Sources of Funding

Types of Funding
• Loans
– Funds loaned to the business
typically repaid in equal monthly payments
• Personal Loans
• Operations-related Financing
• Business Loans

Personal Loans
• Loan obtained by an individual from
a bank and paid back in equal,
monthly installments
– Secured (collateral guarantees repayment)
– Unsecured (signature loan)
• Loans from life insurance (up to 95% of cash value
of policy)
• Credit Cards
• Second Mortgages (Home Equity Credit - up to 80%
of equity built up in property)
• Friends and Relatives

Operations-Related Financing
• Supplier Credit
• Customer Credit (customer deposits)
• Leasing
• Accounts Receivables Financing
• Factoring
• Asset-Based Financing

Business Loans
• Term Loans
– Installment loans with equal,
monthly payments
• Lines of Credit
– Short-term funds; seasonal businesses
• Government Assisted Loans
– Small Business Administration (SBA)
– State and Local Agencies

Choosing a Banker
• Size of the bank
• Familiarity and desire to work with small
businesses
• How the bank will react to your
problems?
• Is the bank helpful?
• Has the bank some special experience
in your industry?
• Is there good personal chemistry?

NC BANKS KEY
Allegacy Federal Credit Union Coastal FCU * 7 (a) Lenders
Alliance Bank & Trust Fidelity Bank (GA) # * SBA Ezpress
BB & T * # Mechanics & Farmers Bank #Preferred Lenders
Bank of America * # RBC Bank * #
Bank of North Carolina* # Self Help Credit Union *
Bank of the Carolinas *
Suntrust *
Bank of Oakridge * Vantage South *
Carolina Premier * Wells Fargo * #
NC Banks

What does the Lender Look For?
Capital
• How much of your own money
do you have invested in the
business (30% of total project cost
is a good rule of thumb for most
banks)
Collateral
• What is the fair market value of
the security that you are offering
to guarantee repayment of the
loan?

Capital
• Capacity to Repay
– How much profit will your company generate?
– Will your cash flow provide you with
enough money on a regular basis to
cover the loan repayment?
• Conditions
– What are the economic, demographic, and
regulatory trends which impact your business?
– What terms can be negotiated to allow the bank
to evaluate the risk/reward consideration?

Collateral
General valuation estimates for assets:
– Certificates of Deposit 100%
– Real Estate 75-80%
– Stock (publicly traded) 75%
– Vehicles 75-85%
– Equipment 50-75%
– Accounts Receivable 50-75%
– Inventory 0-50%

InternalExternal
Helpful Harmful
STRENGTHS
OPPORTUNITIES
WEAKNESSES
THREATS
SWOT Analysis

Personal Character
• What is your track record - personal
and professional - in managing
finances and paying credit
obligations?
• Who are the key managers in your
business; do they have the experience
and the ability to run this business
successfully?

What to put in a Loan Proposal?
• What Bankers Look at in a Loan Proposal:
– Equity
• Lenders expect borrowers to have already invested
from 10 to 30% of the loan amount; if your business has
existed for less than 3 years, plan for 30%.
– Debt-to-Worth Ratio
• Most critical on the day after loan approval and at the
end of the first year of operations; the lower the better
(i.e. - more worth/equity than debt)

General Requirements
• Ability to Carry Debt Service
– Your cash flow projections typically reflect
this
• Secondary Sources of Repayment
– Important especially in a start-up business
(e.g. spouse has full-time position outside of
the business)
• Personal Guarantees
– All parties to the loan request must be willing
to pledge guarantees; personal guarantees
state that the borrowers truly believe in their
venture

Sources of Funding
• SBA Loan Programs (www.sba.gov)
• 7(a) Programs
• Patriot Express
• SBA Express
• Community Express
• You will need to work with a
commercial bank and the SBA for
these programs - no direct SBA loans
as a general rule

Patriot Express Loans
Issue: Patriot Express
Maximum Loan Amount: $500,000
Maximum SBA Guaranty
%:
75/85%
Interest Rate:
Rate may be fixed or variable and lenders and borrowers can negotiate interest
rate, but lenders may not charge more than 2.25 percent over Prime for loans of
less than 7 years and 2.75 percent over Prime for loans greater than 7 years;
lenders may charge 1 percent more for loans of $50,000 or less and 2 percent
more for loans of $25,000 or less.
Eligibility Decision:
Must meet standard SBA eligibility and must be 51 percent or more
owned/controlled by:
· Veteran (other than dishonorably discharged)
· Active Duty Military potential retiree within 24 months of separation and
discharging Active Duty member within 12 months of discharge (TAP eligible)
· Reservist and National Guard
· Current spouse of above or spouse of service member or veteran who died
of a service-connected disability.
Revolving Lines of Credit:
Revolving loans allowed up to 7 years with maturity extensions permitted at the
outset.
SBA Turnaround Time Within 36 Hours
Forms: Streamlined: Lender Uses Mostly Own Forms and Procedures.
Collateral:
Lenders are not required to take collateral for loans up to $25,000; may use their
existing collateral policy for loans over $25,000 up to $350,000, but must take
available collateral for loans greater than $350,000.
Credit Decision By Lender

SBA Express Loans
Issue: SBAExpress
Maximum Loan Amount: $350,000
Maximum SBA Guaranty %: 50%
Interest Rate:
Lenders and borrowers can negotiate the interest rate. Rates are tied
to the prime rate (as published in the Wall Street Journal) and may be
fixed or variable, but they may not exceed SBA maximums:
Lenders may charge up to 6.5 percent over prime rate for loans of
$50,000 or less and up to 4.5 percent over the prime rate for loans over
$50,000
Eligibility Decision:
By SBA, Qualified Lenders May be granted Authorization to make
eligibility determinations
Revolving Lines of Credit:
SBAExpress allows revolving loans up to 7 years with maturity extensions
permitted at the outset
Turnaround Time: Within 36 Hours
Forms: Lender Uses Mostly Own Forms and Procedures
Collateral:
Lenders are not required to take collateral for loans up to $25,000.
Lenders may use their existing collateral policy for loans over $25,000
up to $150,000. For Loans greater than $150,000, follows SBA's general
collateral policy
Credit Decision: By Lender

Community Express Loans
Issue: SBA Community Express
Maximum Loan
Amount:
$250,000
Maximum SBA
Guaranty %:
Follows Standard SBA Guaranty Percent
Interest Rate:
Community Express loans are subject to the same
maximum interest rate as all SBA loans
Eligibility Decision: By SBA
Revolving Lines of
Credit:
Allows revolving loans up to 7 years
Turnaround Time: Mostly Within 36 Hours
Forms: Lender Uses Mostly Own Forms and Procedures
Collateral:
Lenders are not required to take collateral for loans up to
$25,000. Lenders may use their existing collateral policy for
loans over $25,000 up to $150,000.
For Loans greater than $150,000, follows SBA's general
collateral policy
Credit Decision: By Lender
Technical Assistance: Arranged or Provided by Lender

Self Help Credit Union
• Self Help Credit Union
www.selfhelp.org
(336) 378-1840
– CDC for Guilford county (and many others)
– Can provide SBA LowDoc and 7(a) loans
– Small Business Loans
– Loans for Environmental Businesses
• Self Help Credit Union
– Qualifying for Self Help Loans:
• Management
• Cash Flow
• Collateral
• Equity
• Credit History
• Expertise in child care centers and charter
schools

Tips & Suggestions
• Be straightforward and honest in
dealing with lenders
• Be prepared to ask & answer questions
• Be prepared with a business plan
• Understand what you are getting into
• Be patient
• Understand the risk associated with
borrowing

What is your
Show Up & Show Out!
Moment of the Night?
Chisa D. Pennix-Brown, MBA
Info@LadyBizness.com www.LadyBizness.com

GTCC Small Business Center
336.334.4822 – Greensboro
336.454.1126 – High Point
Mark Hagenbuch ext: 62003
markh@gttc.edu
DarLinda Finch ext: 62001
dkfinch@gtcc.edu
Please complete your surveys!

Financing yoursmallbusiness lb-class

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