Start Up Loans

Start Up Funding

Are you ready to start your own business and are looking for SBA financing to do so? Here are a few items that lenders will want to know about you.

Direct and or relatable experience 

This is one of the more important discussions to have up front. You will need to be able to describe to the lender why you and your business will be successful in running this new venture. You should have direct experience in the business you are trying to start up or very strong relatable experience.

Business plan and projections

You’ll need to put together a detailed business plan about how your business works, location, competitors etc. you’ll want to put together to years worth of projections broken down month to month and explain how you came up with these numbers and why they are attainable. Please see templates to business plan and projections templates.

Down Payment

Your down payment will need to be at the very least 10% of the overall project cost which is required by SBA. Most Banks like to see 20% - 30% down on most startups.

Start Up Franchise

A lot of startups are franchises: Franchises are helpful in a startup situation since the franchisor assists in finding a location for the franchisee, assists in displaying what revenues will be brought in annually and give you a proven successful business model. Franchisors need to be approved by the SBA, a list of approved franchises can be found on SBA.GOV under franchise directory. You can also find default rates of certain franchises easily to see how many of their franchisees have failed over the years.

Start Up funding usually includes: Working Capital, Franchise Fees, FF&E, Inventory, Leasehold Improvements and Equipment. Go over these items to see which apply to your project.

Start Ups need to be very strong in the following categories to be approved by a lender: Experience, Credit, Collateral, Capacity, Capital, Projected Cash Flow, outside income, post close liquidity and net worth. These start up loans are usually be priced at current prime rate + 2.75%.

Docs that are most likely to be requested from you by a lender that are helpful in determining if the deal is worth moving forward would be a business plan and projections to determine if the cash flow is sufficient and what the borrower needs for the project and usually explains a lot of things that the lender would want to know about your project.

You should also complete a personal financial statement which will help the lender understand the amount of money that you have available for a down payment and where it is coming from. The personal financial statement will also help the lender understand if you have available collateral to pledge in regard to real estate. This document also gives the lender a good idea of how much you pay in monthly payments to help distinguish your personal needs draw.