Financing.

• Position: Small Business Resources

What a lender looks for:

CAPITAL

How much of your own money do you have invested in the business?

COLLATERAL

What is the fair market value of the security that you are offering to guarantee repayment of the loan?

CAPACITY TO REPAY

Will your cash flow provide you with enough money to cover repayment of the loan?

CONDITIONS

What are the economic, demographic and regulatory trends that impact your business?

CHARACTER

What is your track record--personal and professional--in managing finances and paying credit obligations?

5 Financial Management Strategies

1. Benchmark financial performance against similar companies.

2. Regularly review financial statements, focusing on key metrics.

3. Institute financial controls.

4. Set firm credit policies and monitor accounts receivable.

5. Review all costs for potential reductions.

Types of small business financing used: STARTUP EXPANSION PERSONAWAMILY SAVINGS 62% 26% BUSINESS LOAN FROM BANK 19% 18% PERSONAL/BUSINESS CREDIT CARD 11% 14% OTHER PERSONAL/FAMILY ASSETS 10% 5% HOME EQUITY LOAN 8% 7% GOVERNMENT GUARANTTED/DIHECT LOAN 3% 2% VENTURE CAPITAL -7% -3% BUSINESS PROFITS/ASSETS 18% NONE NEEDED 11% 40% Source: SBA-Employer Firms Note: Table made from bar graph. SBA loan guarantees

Except in rare circumstances (primarily disaster assistance), the U.S. Small Business Administration does not make loans directly to business owners but instead provides loan guarantees to commercial lenders and others who make and administer loans. The business applies to a lender, not the SBA, for financing. The SBA backs those loans with a guaranty that will eliminate some of the risk to the lending partners. Therefore, when a business applies for an SBA loan, it is actually applying for a commercial loan, structured according to SBA requirements, that receives an SBA guaranty. To find out more information...