Frequently Asked Questions

This section can help answer your question about

Financing & Loans

Accounting & Bookkeeping

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How do I finance the start-up of a small business?

To determine financing needs, you should first prepare a business plan with a complete set of financial projections including a balance sheet, income statement, and cash flow statement. With a properly completed business plan, you will have identified your funding needs. Banks will lend to some business start-ups if they are satisfied with your business plan, your level of equity investment, the collateral you have to pledge to the loan, and your credit history and experience. If your request is denied, ask your bank if they would consider the loan with a guarantee from the Small Business Administration (SBA).

How much money do I need to get started?

Once you have taken care of your building and equipment needs you also must have enough money on hand to cover operating expenses for at least a year. One of the leading causes of business failure is insufficient start-up capital. Consequently, you should work closely with your accountant to estimate your cash flow needs.

Should I borrow?

Yes, provided you can handle the debt and provided the borrowing will benefit your business. Handling the debt means that you will be able to repay the principal and interest without undue hardship on you or your business. By using debt, the owner's control is not diluted as it is when money is raised by selling equity.

What do I have to do to get a loan?

When you apply for the loan, you must provide projected financial statements and a cohesive, clear business plan which supplies the name of the firm, location, production facilities, legal structure and business goals. a clear description of your experience and management capabilities, as well as the expertise of other key personnel, will also be needed.

Will the U.S. Small Business Administration (SBA) loan money to me?

Except in isolated and special situations, the SBA does not make direct loans. Its loan activity is in the form of participating loans and loan guarantees. You must deal with a bank to reach the SBA. You can think of the SBA as a level above your bank that is providing incentives to your bank to make it easier for you to get debt financing. The bank plays a major role in evaluating your loan application and in administering the loan. The bank's agreement is necessary before the SBA will get involved.

Can I get an SBA loan to refinance present debt?

Yes. Debt refinancing is allowed under the SBA programs. It is not the preferred form of SBA involvement, but it will be supported if the refinancing has a beneficial business consequence. Refinancing just to get out of a jam is usually not favored.

Does the SBDC provide financing?

The SBDC does not provide financing. Our assistance is technical and educational in nature. We work with banks and other lending agencies and organizations to assist in putting together financial projections, but the actual financing comes from outside sources.

What type of collateral do I need for a loan?

Repayment ability from the cash flow of the business is a primary consideration in the SBA loan decision process but good character, management capability, collateral, and owner's equity contribution are also important considerations. All owners of twenty percent (20%) or more of the business are required to personally guarantee SBA loans. The SBA does not deny approval for a SBA Guaranty Loan solely due to lack of collateral; however, it can be used as a reason, in addition to, other credit factors.

What are the alternatives in financing a business?

Committing your own funds is often the first financing step. It is certainly the best indicator of how serious you are about your business. Risking your own money gives confidence for others to invest in your business. You may want to consider family members or a partner for additional financing. Banks are an obvious source of funds. Other loan sources include commercial finance companies, venture capital firms, local development companies and life insurance companies. Trade credit, selling stock and equipment leasing offer alternatives to borrowing.

Where can I find a grant to start my small business?

Grant monies are usually not available for new venture businesses, with a few exceptions of high technology businesses. You may find grant information at your local library, The Catalog of Federal Domestic Assistance, or from the SBA

Where can I find additional information about financing and loans?

Venture Capital Links

Other Financial Resources

  • Celtic Bank – Celtic Bank is a leading nationwide small business lender specializing in SBA 7(a), SBA 504, USDA B&I, and conventional business loans. Business loan proceeds can be used for working capital, commercial real estate, commercial ground-up construction, equipment, inventory, business acquisition and debt refinance.
  • Fundation – As a technology-empowered lender, Fundation can make faster and smarter lending decisions. As a non-bank lender, Fundation can deliver capital to more borrowers with varying credit profiles.
  • Fundera - Through their one application, you can receive loan offers from their network of over 20 trusted lenders.
  • MEDFAS – Are you a manufacturer looking to grow your operations? MEDFAS can help you understand the benefits of tax-exempt financing and help you obtain it. Tax-exempt financing is used for the purpose of investing in new facilities, production lines, machinery and equipment, and technological advances that bolster productivity and profit.
  • Riviera Finance – Riviera Finance turns business receivables into ready cash. They fund up to 95% of invoice within 24 hours of verification.
  • Fiscal Advantage – Fiscal Checkup provides in-depth financial analysis and actionable insights to help established businesses fuel better decisions and identify effective next steps.

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How much do I need to know about accounting and bookkeeping?

Since numbers constitute the language of business, the more you know about this language, the better you will understand your business and the better will be your decisions. As a minimum, you should understand your bookkeeping system. This means you should understand how your money is spent and how much money you have coming in. You should also be able to read and understand the two basic summary financial statements: balance sheet and income statement.

Why are financial projections necessary?

Financial projections are estimates of future business activities. By estimating the future, you have a target to shoot at. You have a frame of reference, even if the projection is not highly accurate. The chief value of financial projections for a business owner is not so much the attempt to predict the future with accuracy, as it is a plan to set a target or goal to work toward.

What financial statements will I need?

You should prepare and understand two basic financial statements:

  1. The balance sheet, which is a record of assets, liabilities and capital; and
  2. The income (profit and loss) statement, a summary of your earnings and expenses over a given period of time.

What is a balance sheet?

Often referred to as the basic business financial statement, the balance sheet shows three things about a business: assets, liabilities, and owner's equity. Assets are things that are owned by the business. Liabilities are things that are owed to others. Owner's equity is the difference between assets and liabilities.

What is an income statement?

An income statement (often called profit and loss statement or P&L) is the scorecard for business. It shows the revenue, expenses and profit or loss. It shows these things for some period of time, usually a month or a year. An income statement is usually titled “Income Statement for X Business for the period January 1 to December 31.”

What is a cash flow statement?

The simplest form of cash flow statement is a listing of cash coming into the business and cash going out. You don't record anything else – just cash you get and cash you pay out. If it is either cash received or cash paid, it is listed. If it is not cash, it is not listed.

What is equity?

Equity has two different, but related meanings. On the one hand it is the term applied to the money the owner puts into the business – money that is not borrowed or is borrowed from relatives without any requirement to pay it back. Equity also means the same as “net worth,” which is the difference between the assets and liabilities of a business. It is the portion of the assets that the owner would get after all the liabilities were paid. Equity is one of two sources of capital for a business. The other is debt. Equity comes from the owner and debt comes from others, usually banks or other financing agencies.

What is capital?

To operate any type of business activity, you need things. These things are different from business to business, but usually include equipment, tools, office equipment, vehicles, computers, etc. These assets are purchased with money. Money is usually referred to as capital.

Is it better to lease or buy the store/plant and equipment?

This is a good question and needs to be considered carefully. Leasing does not tie up your cash; a disadvantage is that the item then has no resale or salvage value since you do not own it. Careful weighing of alternatives and a cost analysis will help you make the best decision.

Should I hire a Certified Public Accountant (CPA)?

You can get accounting advice from different sources. A Certified Public Accountant (CPA) is probably the most competent to give you advice on a wide variety of business topics. Others, such as public accountants, bookkeepers, and specialists who focus on small business record keeping, can also be useful. C.P.A.'s are usually the most expensive, but may still the best value because of their breadth of knowledge and their ability to assist you with all aspects of your business finance, accounting and tax issues.

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