When it comes to business financing, business owners have the option to apply for a business loan through the SSBCI (State Small Business Credit Initiative) which also includes a Loan Guarantee Program. This way business owners get a hold on funds required for various business needs such as inventory, business procurement or start-up costs.
Although in some cases state needs to approve the business loan terms, generally, they are negotiated between the bank and the borrower. There are also cases when the lender negotiates the terms with the state and then the loan and the guarantee are approved. There is a dedicated reserve which state puts aside to guarantee for the approved loan.
Small Business Financial Development Corps are issuing loan guarantees on behalf of the state. Before issuing a loan guarantee FDC’s will review and approve applications. The percentage of the loan which will be covered by the guarantee is negotiated between the FDC and the lender, but it is, generally, about 75%. Loan guaranteed term averages to three years and the maximum allowed is seven years.
The application for such loan will have to be supported by the following requirements:
1. A written description of the existing or proposed business.
2. CV’s of management personnel and the owners of the business.
3. Current personal financial statements are required for all principal owners (20% or more) and guarantors, together with copies of the last three years Federal Income Tax Returns. Financial statements should not be older than 60 days.
4. Written statement showing how the loan funds are to be repaid, including repayment source and time required. This written statement has to be supported by cash flow schedules, budgets, and other relevant information.
5. For a proposed business provide a pro forma balance sheet showing source and use of both equity and borrowed funds.
6. Financial data on business. For an existing business provide tax returns and financial statements for the past 3 years. A recent interim statement should also be provided.
A recent aging of accounts payable and accounts receivable should also be included as well as a schedule of term debt. Other balance sheet items of significant dollar amounts contained in the interim statement should be explained as to the nature of the item.
7. Projections of planned operations should be provided for at least 12 months on a monthly basis reflecting revenues and expenses with additional projections provided on a cash flow basis. The expectations used in preparing the projections should support the need for the funds requested and reflect the ability to repay the loan.
8. More papers are requested too. These items will often also include:
- purchase agreements
- purchase orders
- franchise agreements
Due to the fact that this is a government guaranteed business loan, the borrower must submit a number of auxiliary documents authenticating the need for the loan plus supporting paperwork indicating a solid business plan and the ability to repay the loan.
Luckily, for those looking for a quick capital solutions with less paperwork, there are other funding options that don’t require so many financial statements and businesses planning which banks need to underwrite a loan. Among other business fields, we also offer business loans for used trucks. Should you have questions about obtaining financing please call the Underwriting Specialists at Liberty Capital Group, Inc. at 888-798-3976.
Small business borrowing – introduction:
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