Resumes of each owner and key management members.
Personal Financial Statements: SBA requires
financial statements for all principal owners (20% or more) and
guarantors. Financial statements should not be older than 90 days. Make
certain that you attach a copy of last year's federal income tax return
to the financial statement.
Loan Repayment: Provide a brief written statement
indicating how the loan will be repaid, including repayment sources and
time requirements. Cash-flow schedules, budgets, and other appropriate
information should support this statement.
Existing Business: Provide financial statements for at
least the last three years, plus a current dated statement (no older
than 90 days) including balance sheets, profit & loss statements, and a
reconciliation of net worth. Aging of accounts payable and accounts
receivables should be included, as well as a schedule of term debt.
Other balance sheet items of significant value contained in the most
recent statement should be explained.
Proposed Business: Provide a pro-forma balance sheet
reflecting sources and uses of both equity and borrowed funds.
Projections: Provide a projection of future
operations for at least one year or until positive cash flow can be
shown. Include earnings, expenses, and reasoning for these estimates.
The projections should be in profit & loss format. Explain assumptions
used if different from trend or industry standards and support your
projected figures with clear, documentable explanations.
Other Items As They Apply:
Lease (copies of proposal)
Articles of Incorporation
Copies of Licenses
Letters of Reference
Letters of Intent
Collateral: List real property and other assets to
be held as collateral. Few financial institutions will provide
non-collateral based loans. All loans should have at least two
identifiable sources of repayment. The first source is ordinarily cash
flow generated from profitable operations of the business. The second
source is usually collateral pledged to secure the loan.
The 5 C's of Credit
Your bank is in business to make money. Consequently, when a bank
lends money it wants to ensure that it will be paid back. The bank must
consider the 5 "C's" of Credit each time it makes a loan.
Capacity to repay is the most critical of the five
factors. The prospective lender will want to know exactly how you intend
to repay the loan. The lender will consider the cash flow from the
business, the timing of the repayment, and the probability of successful
repayment of the loan. Payment history on existing credit relationships
- personal and commercial - is considered an indicator of future payment
performance. Prospective lenders also will want to know about your
contingent sources of repayment.
Capital is the money you personally have invested in
the business and is an indication of how much you will lose should the
business fail. Prospective lenders and investors will expect you to
contribute your own assets and to undertake personal financial risk to
establish the business before asking them to commit any funding. If you
have a significant personal investment in the business you are more
likely to do everything in your power to make the business successful.
Collateral or guarantees are additional forms of
security you can provide the lender. If the business cannot repay its
loan, the bank wants to know there is a second source of repayment.
Assets such as equipment, buildings, accounts receivable, and in some
cases, inventory, are considered possible sources of repayment if they
are sold by the bank for cash. Both business and personal assets can be
sources of collateral for a loan. A guarantee, on the other hand, is
just that - someone else signs a guarantee document promising to repay
the loan if you can't. Some lenders may require such a guarantee in
addition to collateral as security for a loan.
Conditions focus on the intended purpose of the
loan. Will the money be used for working capital, additional equipment,
or inventory? The lender will also consider the local economic climate
and conditions both within your industry and in other industries that
could affect your business.
Character is the personal impression you make on the
potential lender or investor. The lender decide subjectively whether or
not you are sufficiently trustworthy to repay the loan or generate a
return on funds invested in your company. Your educational background
and experience in business and in your industry will be reviewed. The
quality of your references and the background and experience of your
employees will also be considered.