Mark Kern

Starting A Business

Many people approach us in the early stages of their new dream - starting a small business. There are so many things to be aware of. While there are many important aspects to take into consideration such as corporate structure and business planning one piece always gets overlooked. Where is the funding going to come from?

We want to talk about a few key components to getting funding as a start-up business. Here are a few key points to remember:

-Be experienced.

Many people pick an industry that they know will do well. Right now, auto repair facilities are one of the easiest industries to finance. The problem is, if you've gone to school for education and your experience with auto repair consists of changing your oil - this is not the industry for you. There are a few things that can be done to overcome this. One option is to find a business partner who has experience in auto repair. Another choice is to find an industry that matches your talents. If you are a retired teacher, an ideal business would be a tutoring center or daycare type facility. Experience is heavily weighed in the underwriting process. Be sure to focus your resume at the industry you want to go into.

-Have a partner that is keeping a W2 type job.

Either you, or a business partner, should have an alternate source of income. This may be a job where you receive a paycheck, income producing properties, or an existing business that is providing an income. The underwriting process for business loans is heavily based on ability to repay as well as likelihood of success. This doesn't mean you are sitting on thousands of dollars. It's reassurance for the lender that you will be able to repay the loan. If you have a pension, a spouse who will still be working that can be deemed one of the principals of your new company, or some other way to show you have a steady income stream which will not change it's seen as a huge asset to the funding source.

-Find a stable industry.

Right now, there are many businesses that are struggling greatly. If you are looking to start a construction company right now, when construction is down, funding will be difficult. If you want to start a pet grooming facility, stop a moment and think. How many people are cutting back on expenses like a day at the doggie spa? Be realistic in the industry you want to start in. What businesses are thriving in your area? Auto repair, educational programs and health related facilities are some of the top businesses right now to be in.

-Have assets.

When starting your business, the biggest mistake people make is going out to buy all the equipment that they need and then they leave themselves strapped financially. 6 months later, they come to us or their bank seeking a working capital loan. These loans are very, very difficult to get. The best scenario is to have your equipment purchase financed so that you can hold on to the money you have to use as working capital. We have equipment leasing programs up to 90% for purchases. Put the 10% security deposit down on your equipment and hold on to your cash reserves.

The American Recovery and Reinvestment Act contains multiple changes to the Small Business Administration's programs. These changes have been put into effect to encourage lenders to open up their lending to the small business sector. These changes can effect small business loans and commercial loans of many different sizes and in many different ways. This act is critically important in the lending industry, and so we thought we'd share some highlights.

-The present SBA guarantee was up to 85%. This has been increased to 90% on some loans to encourage lenders to continue financing.

-A new business stabilization loan is in the works which will be 100% guaranteed by SBA. These loans will be up to $35,000 to help businesses refocus and succeed long term.

-The 504 Certified Development Company program now allows refinancing of existing loans for fixed assets.

-Guarantee fees for the 7(a) and 504 programs have been temporarily eliminated allowing less upfront expense for both the borrower and the lender.

For more information on the stimulus package visit www.sba.gov/recovery

SCORE which is a resource partner of the SBA offers counseling services nationwide. SCORE offers mentoring and counseling services to small business throughout the country. SCORE is working with the SBA to help inform small businesses of these changes and the effects they may have. Workshops are also being put on to get the word out and to educate the small business owners of America.

We at Commercial Finance Help have active volunteers participating in Broward County. For more info on the Broward County chapter of SCORE, visit www.browardscore.org . If you are outside of the Broward County, FL area, visit www.score.org to get more information.

SCORE and the SBA are here to make sure small businesses are here to stay. These resources are invaluable to maintaining your success. They're here, so use them!