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Questions & Answers.

  Question – Can I Use My Home Equity To Finance A Business?     Our Response – If you own a home and have built up equity, using a home equity loan to finance a business is an option.  Now many people don’t want to consider this option because they say – “I don’t want to get a home equity loan for my business because I don’t want to risk losing my house if the business fails.”  While this is a legitimate worry, the fact in most cases is that when you go to the bank for a business loan and you ...

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  Question – What are the SBA’s collateral requirements?     Our Response – Even though the SBA provides a guarantee to the bank, there are still SBA collateral requirements to get a business loan.  Collateral is an additional form of security which can be used to assure a lender that you have a second source of loan repayment. Assets such as equipment, buildings, accounts receivable, and (in some cases) inventory are considered possible sources of repayment if they can be sold by the bank for cash. Collateral can consist of assets that are usable in the business as well ...

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  Question – What is the best business loan for a minority woman?     Our Response – There were a handful of loan and loan guarantee programs about a decade ago that have since mostly been phased out that targeted women and minority businesses from various state and federal agencies.  These programs were typically nothing more than a rebranded version of a program they already had in place.  There are still a few programs in existence that are targeted for women and minorities.  These are typically state operated micro loan programs, such as Georgia’s woman owned business loans program. ...

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  Question – What is an SBA loan and would I want one?  I hear that term a lot when looking for small business financing but not sure why I would want the government more involved in my business than it already is.     Answer – In some cases you don’t want or need an SBA loan.   First off, let’s dispel a common myth about SBA loans. The SBA does not directly provide financing with the exception for their Disaster Loan. What the SBA does is provide assurance to the bank that if the business owner defaults, the bank ...

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  If I am applying for a business loan, what type of information does the bank usually ask for?     Our Response – When applying for a business loan there are a number of forms and documents to fill out for the bank.  While the information required may vary by bank, here are a number of items that are typically required:   Personal background and financial statements Business financial statements (income statement & balance sheet – if the business is already open) Last 3 years of business tax returns (If the business is already open) Projected financial statements (Banks ...

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  Question – I am interested in purchasing an existing, successful business from my current employer.  I have talked with my bank and even though I have cash to put into the deal, his concern is the lack of collateral.  The current owner is retaining and then renting the business real estate and business equipment is minimal. Since this is essentially an unsecured request, would an SBA Advantage 7a work?     Our Response: SBA’s written policy regarding collateral has two parts: When a loan guaranty is approved, the SBA would expect all existing business assets collateral. After exhausting business ...

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  Question – There was a bar that closed in my town due to the owner’s health and has been closed for over a year.  The owner did not keep good records and it showed a loss for the earlier years he owned it.  I feel like no bank is going to finance this adventure without a profit loss statement proving that the business made money, so I am pursuing a possible lease option with the owners for one year to create my own profit and loss statement  with option to buy after one year, but I probably will need ...

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  Question – I have the opportunity to purchase a building next door to our current facility at a significant discount to what I believe it’s worth.  If the appraisal is higher than purchase price can I borrow additional money through that additional equity?     Our Response – In most cases the answer is no. Having additional value in the building is great but most banks will only lend up to the sales price. Banks will however, typically allow a refinance on property two years after purchase at which point they lend against the appraised value.      

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  Question – If I Incorporate but Go Out of Business, Do I Still Have To Pay Back My Loan?     Our Response – The short answer is yes.   When you create an LLC you get liability protection.  If someone sues your business and you weren’t negligent your personal assets are safe, but this does not apply to paying off debts in the event of a business failure. Almost every bank is going to require a personal guarantee for any person with a 20% or more ownership position in a corporation or LLC.  There are loans called non-recourse ...

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  Question – I am in the process of purchasing a laundromat and to develop my company further i need huge loan-FAST! Is it possible to acquire quick accessible money to finance a laundromat and be able to build my credit at the same time? My business requires a large sum of money, do you think i’ll be able to get this amount in a reasonable amount of time?     Our Response – I’m not sure what you consider a huge loan but there are a few things to think of.  Without knowing anything about the project I assume ...

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  Question – I have had an opportunity come by me that is a great chance to be my own boss…A liquor store for sale listed at 650000 + inventory which is running around 400-450k estimated.  My question is can a SBA loan be used for a liquor store? How much will I need to put down? and Will the SBA loan cover inventory?  It has a strong cash flow back to the owner.  For me I have a great operations background as well as liquor and restaurant experience, but do not have a clue when it comes to financing ...

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  Question – I have worked for my father my whole life (30 yrs) in the manufacturing field. I am currently the office manager of his company which he is in partnership with 1 other person. He would like to retire as soon as possible and there was talk at one time of me buying his portion of the business but I have no collateral or available funds to do that. Once sold he is going to stay on for a year as a consultant The business is profitable and always has been and the future looks the same. My ...

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  Question – I want to start a law firm and need $60,000 for start up costs and filing fees. I have been practicing in my field for 3 years, have established client base and contacts. I have a 620 credit score, primarily due to high law school loans.     Our Response – There are two potential issues to overcome to get financing for your law firm.  First of all what are you purchasing with the $60,000.  If this money is going to soft costs such as filing fees, leasehold improvements, advertising, etc you will need to find collateral ...

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  Question – My wife and I started a hair salon which was doing great.  We were growing and about to lease a storefront but I got sick and between the medical bills and time away from the business our credit really suffered. We are now back on our feet and the business is growing again but we need to expand again.  Our credit scores are below 600. Is there any way to get a hair salon loan between $1000 and $3000 to move into a larger building? The only collateral we have is the salon equipment and furnishings which ...

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  Hello! I am trying to get a retail store open and need a loan of $140,000. I have a business plan, many years of experience, a location (though I haven’t signed a lease) and a merchandise and fixture plan. My question is this….. How does the bank value the business assets of a start-up? In retail, so much money is tied up in inventory…. does this count as collateral against the loan? I plan on spending about $60,000 on inventory and the rest on build out, equipment, cash reserve of about $60,000 and the remainder on misc. licenses and other ...

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  Question – I have been pursuing a SBA loan without success. I managed to get a $5,000 loan from my bank that I am paying to try and build credit. My credit score is 583. I am frustrated because I have an enormous opportunity to make money through manufacturing and production of industrial electric components. I have all my tools already as I work in this field already. I need to acquire a building and materials. I have even shown a contract that General Electric has submitted for my review. I have shown a GE contract to loan officers ...

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  Question – I’ve been in business just under two years and to get a trucking business loan as we are in a booming marketplace. First full year of gross revenue just under $100,000.00.  We need to get a small business loan to expand our web site and to assist in purchasing new equipment. We have established credit via credit report agencies including Dun & Bradstreet.     Our Response – Traditionally transportation businesses loans are difficult to come by as businesses in that industry are the second most likely to default on a loan after restaurants.  Reading the question ...

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  Question – I need to get a loan for a party rental business that I started 10 years ago. Since start up each year has always been better than the previous one. So much so, that in 2010 I quit my full time job to focus solely on the business. When quitting my job I didn’t factor in the additional investments that I have made the last few years. So now, I have about $60k worth of business debt and would like to invest another $25-$30k in the next year or so. Also, all of this debt is now ...

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  Question – I opened a children’s consignment store in July of 2011.  As a single mother of two girls who enjoys shopping  for them I was frustrated about how expensive it is to buy clothing and toys for them so I started my store specializing on selling new and used children’s items such as clothing, shoes, toys, baby gear, etc. at affordable prices to be a one-stop shop for moms like me.  It is the only store like it in my area unless you drive over 45 minutes away.   In my first full year, I made $27,000 and ...

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Question – We own a successful vineyard and winery in Indiana that has been in business for 15 years.  Over the years we have built a leading brand in our region through a great product and aggressive retail distribution but what makes the most profit is through tasting room sales. Our current problem is that our tasting room consists of a 400 sq. ft retail area that has capacity enough to accommodate 20 to 30 people at a time on a heavy weekend or during festival events. Festivals will typically bring in over 300 people and we are losing a ...

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  Question – How much are SBA loan fees for a 7(a) loan?     Our Response – On an SBA 7(a) loan there is a guarantee fee of approximately 3% of the guaranteed portion of loans less than $1,000,000 and approximately 3.75% of the guaranteed portion of loans exceeding $1,000,000.  The guaranteed portion is currently 85% on loans under $150,000 and 75% over $150,000.  So if you have a $500,000 loan, the SBA will guarantee 75% which means the guaranteed portion of the loan is $375,000.  At 3% of the guarantee portion of the loan, fees would be approximately ...

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Question – How Does Accounts Receivable Financing/Factoring Work?     Our Response – There are some instances where a loan may not be the best option such as when a business gets a large order but doesn’t have the cash to purchase the inventory or wait for payment. If this is the case, accounts receivable financing or factoring may be a better solution.   Factoring is the selling of a company’s accounts receivable, at a discount, to a factoring agency, which then assumes the credit risk of the account debtors and receives payment as the debtors settle their accounts. Factoring can ...

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Question – I have the opportunity to purchase a building next door to our current facility at a significant discount to what I believe it’s worth.  If the appraisal is higher than purchase price can I borrow additional money through that additional equity?     Our Response – In most cases the answer is no.  Having additional value in the building is great but most banks will only lend up to the sales price.  Banks will however, typically allow a refinance on property two years after purchase at which point they lend against the appraised value.  

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