They are looking for a well-thought out plan.  What will the business do?  Who will own it, manage it?  Does the person (or persons) have necessary knowledge and experience to make the business successful?  Where will it be?

Be as thorough as possible. Lenders need to know what you are thinking about prospective customers, pricing of the product or service, etc.  How will this business make a profit?  Will it make enough to pay expenses and also pay back a loan?

Lenders are looking for a plan that makes sense.  Something feasible.  The narrative needs to agree with the Cash Flow – the words should paint the same picture as the numbers. 

Make sure your name and contact information is on the plan.  Sounds simple, but many forget.

If a plan is not funded by a lender, please ask why.  Lenders can share good advice that may help you remedy a situation.

When you apply for a loan, inquire regarding the length of time the average approval process takes.  And, second question:  how long does it take to receive loan proceeds after an approval.

By Charlene Finerty, owner www.PlansAndProfits.com

WASHINGTON – The American Recovery and Reinvestment Act contains a package of loan fee reductions, higher guarantees, new SBA programs, secondary market incentives, and enhancements to current SBA programs that will help unlock credit markets and begin economic recovery for the nation’s small business sector.
“The tax incentives and credit stimulus elements of the Recovery Act will truly help small business owners affected by the credit crunch, and will provide financing opportunities to help them create new jobs in their communities,” said Acting SBA Administrator Darryl K. Hairston.

“There’s a lot to digest in the legislation, and SBA has established teams to tackle a wide variety of policy decisions, system modifications, regulatory changes, legal requirements, and new program launches authorized by the President and Congress,” said Hairston.

The bill provides $730 million to SBA and makes changes to the agency’s lending and investment programs so that they can reach more small businesses that need help.  The funding includes:
• $375 million for temporary fee reductions or eliminations on SBA loans and increased SBA guaranteed shares, up to 90 percent for certain loans
• $255 million for a new loan program to help small businesses meet existing debt payments
• $30 million for expanding SBA’s Microloan program, enough to finance up to $50 million in new lending and $24 million in technical assistance grants to microlenders
• $20 million for technology systems to streamline SBA’s lending and oversight processes
• $15 million for expanding SBA’s Surety Bond Guarantee program
• $25 million for staffing up to meet demands for new programs
• $10 million for the Office of Inspector General

The bill also authorizes refinancing for certain SBA loans so borrowers can expand their businesses on favorable terms, and expands leverage capability for Small Business Investment Companies.

“We are going to be part of the solution, and this bill gives us specific tools to make it easier and less expensive for small businesses to get loans, give lenders new incentives to make more loans, and help restore healthy SBA secondary markets to boost liquidity,” Hairston said, noting also that more details on implementation will be coming over the next few weeks.

The stimulus bill takes a comprehensive approach and attacks several problems facing small businesses at once by reducing fees, guaranteeing a greater share of certain loans, expanding capacity in the Microloan program, providing new loans to help small businesses keep their doors open through economic hardship, as well as new mechanisms to help unfreeze the secondary markets for SBA-backed loans.

Declines in SBA lending volume last year, which are continuing in FY 2009, reflect problems in the broader credit markets, and present hurdles to small businesses that are seeking credit in the current economy.  The financial crisis has created a variety of conditions that impact small businesses, including a lack of liquidity in the banking system, a reluctance of many lenders to extend new loans, tightened credit standards, weaker finances at small businesses, and uncertainty about taking on new debt on the part of many entrepreneurs.

The Recovery Act addresses small businesses’ lending problems, and addresses key investment and contracting issues.  The bill helps Small Business Investment Companies better leverage investment capital to reach more small companies.  The bill also increases the current contract limit for SBA’s Surety Bond Guarantee program, which will help small businesses compete for contracts.

90 Percent Guarantee
The bill allows SBA to raise its loan guarantee from the current levels to as much as 90 percent for some loans.  At present, SBA can guarantee loans up to 85 percent on loans up to $150,000, and up to 75 percent on loans greater than $150,000.  The 50 percent guarantee on SBA Express loans would remain unchanged.  Increasing the SBA guarantee percentage will encourage lenders to extend more capital to small businesses by increasing the share covered by an SBA guarantee.

Business Stabilization Loans
The bill creates a new SBA loan program to provide deferred-payment loans of up to $35,000 to viable small businesses that need the money to make payments on an existing, qualifying loan for up to six months.  These loans will be 100 percent guaranteed by SBA.  Repayment would not have to begin until 12 months after the loan is fully disbursed.  The bill provides $255 million for this new program. These loans will help ensure that small businesses have time to re-focus their business plans in order to succeed in the long run.

Microloans
The bill expands SBA’s Microloan program, which provides small loans (up to $35,000) paired with technical assistance to start-up, newly established or growing small businesses.  The bill provides funding to increase loans from SBA to participating Microlenders by $50 million through September 30, 2010, and adds $24 million in grants to provide technical assistance to borrowers.  Historically, these loans reach low-income individuals, women and minorities in both rural and urban areas.  Expanding this program through the stimulus bill will help ensure these entrepreneurs are not left behind in the credit crunch.

Refinancing
The bill also gives SBA the power to use the 504 Certified Development Company program to refinance existing loans for fixed assets, providing fresh support for small business expansion.  This change will help business owners expand their current development projects and create jobs in their communities.

Secondary Market Expansion
The bill authorizes SBA to establish a secondary market for pools of “first lien” loans under the 504 program.  These “first lien” loans from commercial lenders currently have no SBA guarantee.  The bill authorizes SBA to deploy federal guarantees for pools of these first lien loans, so that they can be sold to investors in a secondary market.  Providing liquidity for these first mortgages will help encourage lenders to continue participating in SBA’s 504 loan program, which provides a key source of capital for community development and other projects.

The bill also empowers SBA to set up a Secondary Market Lending Authority that would make direct loans to broker-dealers that participate in the secondary market for SBA-guaranteed 7(a) loans.  These broker-dealers would use the funds to purchase SBA-backed loans from commercial lenders, assemble them into pools and sell them to investors in the secondary loan market.  This program may help address some of the issues facing the secondary market for SBA loans and may ultimately help SBA lenders make new loans to borrowers.

Investment Program
The bill helps SBA-licensed Small Business Investment Companies (SBICs) and families of SBIC funds better leverage the capital they use to invest in small businesses.  The bill sets maximum levels of funding the agency can provide to these companies at up to three times the private capital raised by those companies, or $150 million, whichever is less.  It also raises the percentage any one SBIC can invest in a single small business to 10 percent of total capital, and raises from 20 percent to 25 percent the percentage of any licensee’s dollar investments that must be made in “smaller” businesses.

Surety Bonds
The bill also raises the maximum contract amount that can be covered by an SBA guaranteed surety bond from $2 million to $5 million, and, under certain circumstances, for contracts amounting to $10 million, and provides additional funds to cover the costs of expanding this program.  Small businesses need surety bonds in order to bid on and obtain many federal and other contracts.  SBA guarantees surety bonds to small businesses that private surety companies would not otherwise be able to extend.

Release Date: February 18, 2009
Contact: Mike Stamler  (202) 205-6919
Release Number: 09-10
Internet Address: http://www.sba.gov/news

This interview covers both start-up business loans as well as financing for existing businesses. Take a few minutes to see what you need to do if you’re looking for funding.

Click here to listen to interview.

The next few articles are intended to familiarize you with the most popular business entities and enable you to make a more informed decision at which type of entity is best suited for your specific business.

This week we will start with the Sole Proprietor and then continue on in future related articles with the Partnership, Limited Liability Company (LLC) and the Corporation (S & C).

The sole proprietorship is a one-owner business. This type of business is what people think of as the “mom and pop” or a home-based business, though it does not have to be run out of the home. The owner has the sole right to manage the business, solely entitled to the profits (and losses) and is unlimitedly responsible for the debts of the business.

This is the easiest business form to establish, in fact, most sole proprietorships start small and their initial jobs are usually commissioned on a hand-shake. Essentially, you just hang out your shingle and you have established a business. Other steps may be required by your particular state and locality, such as registering a fictitious business name (a name other than your own personal name), registering for a business license or maybe obtaining a sales tax license.

On the up-side this is the easiest business entity to form but on the down-side it is the one with the most potential for personal loss. The owner, who usually runs the business, is personally liable for all business debts, taxes and whatever other liabilities that may come up for the business. Personal assets, such as, cash in bank accounts, equity in a home or car, or personal investments, can be used to satisfy a court judgment that may be entered against the business. The owner is also personally liable for its employees while they are acting in the course and scope of their employment.

Can’t forget to mention that filing taxes for a sole proprietorship is easy. All profits and losses are reported on the personal income tax return of the owner (Schedule C, Profit or Loss From Business).

When contemplating this type of entity just keep in mind that while it is easy to start there is no limited liability and the personal loss may be greater than you are willing to take.

Jody Fortuna and Michael Schiller own Incorporating Services, Inc., a business that professionally forms corporations and limited liability companies (LLCs) for small business. Jody also presents workshops with SCORE, she is committed to helping entrepreneurs, small business owners learn about incorporating, and the benefits, as well as helping them easily and affordably undertake this important business step without sacrificing quality. For more information, go to IncorporatingSvc.com, call 427-5175 or e-mail Jody@IncorporatingSvc.com.

Many banks are failing, merging, or being taken over.

The Fed is cutting rates and bailing out some of the largest companies in America.

GM’s stock value has shrunk from 52 billion dollars in 2000 down to 3.8 billion in 2008.

Homes are foreclosing in record numbers throught the United States.

So, the question is…with so much volitility, where do you invest your money right now?

I’m no financial guru, but I can tell you from experience, that the best investment right now is investing in your own business.

With so much happening right now, if you own your business, or are in sales, NOW is the time to start prospecting smarter.

Here are a few tips to get you going:

1) Review your existing advertising budget. See what’s working and what’s not working. Stop the strategies or ads that are not working, and invest that amount in something else more targeted to your market.

2) Review your advertising message. Whether you advertise on radio, cable, tv, newspaper, direct mail, internet, or anywhere else — you must ensure that the message is targeted to your market. You must ensure that for every dollar you invest in advertising, you maximize it by finding the message that works best for you. If your advertising is not producing results, stop throwing your money away. By the same token, ensure that you increase your budget for ads or media which is currently giving you excellent returns.

3) Go back to basics. Review your marketing plan and do the things that always worked for you.

4) Think outside the box. If going back to basics does not work, start thinking outside the box. Think of ways to get the message about your products or services. Discuss ideas with other business owners, your staff, industry magazines, etc.

5) Attend networking events. The more visible you are within your target market, the more effective your marketing will be.

6) Continue your education. If your business is stagnant right now, and nothing seems to be working, seek professional help, or purchase books, courses, and any information that will help you promote your business.

One place to get free information on ways to attract more customers is at www.HowToAttractCustomers.com. You will be able to download two workbooks that will give you many strategies to attract customers.

If you’d like to purchase a great course on Marketing on the Internet and creating a strong business foundation for your business, you can visit www.InternetMarketingMasteryWeekend.com.