Financing A Business

Discussion in 'Growing and Managing a Business' started by TheStar, Oct 23, 2009.

  1. TheStar

    TheStar
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    When one's credit isn't so great, what is the likelyhood that he/she will get a loan to start a small business?

    A guy I go to school with told me that banks don't look at your credit; they look at the potential profit of your business. Is there any truth to this?

    I would like to start a restaurant (and REALLY soon) but my credit isn't the best. My debt is about $6500 but I'm slowly paying it down through a debt consolidation program (which has gone well for a year now). What are my chances here?
     
  2. seanstevens

    seanstevens
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    Hi 'TheStar'. It is my understanding that a US bank would take a look at your FICO score. Would you be running the business under a LLC? If so, does this LLC have its own credit score? (credit scores for businesses are mainly made up of payment history). It would be worth putting together a fool proof business plan including exactly how much investment is required and how long it would be expected before it can be paid back etc. to show your bank you are serious and they should consider it.



    If banks are not an option then you may want to look at other sources of investment such as an angel or other kind of investor.
     
  3. TheStar

    TheStar
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    Hi Sean. Thanks for the reply. I'm actually going to run the business as a sole proprietor. I agree about the fool proof business plan, so I will be working hard on that. My main concern is getting funded. I have read articles about starting a business and they mentioned having assets and collateral. I have none! Well, I suppose I can put up my car, tv, computer, CDs/DVDs, etc. But, I'm totally fine with that. As far as monetary assets like a savings account, checking account, I have those but after bills for my living expenses, the banks would just laugh.
     
  4. seanstevens

    seanstevens
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    As a sole proprietor they would most likely look into your FICO score. It will come down to how well you can sell yourself and the business plan. I'm sure you are already doing it, but do plenty of research on the area you want to open in (i.e. how many people walk past the location in a day), the competition, prices, equipment - everything in detail. This will show the bank that you have put serious thought into it and this may give them the confidence in your abilites - I'd also go so far as to invite the banks small business advisor to dinner and cook a selection of the food (if appropriate) to show them what you will be doing..

    Good luck
     
  5. TheStar

    TheStar
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    Right on. Thanks a lot. I will continue to keep my hopes up :)
     
  6. Fergal

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    I'd agree with Sean that you should consider putting together a business plan. This doesn't necessarily have to be difficult and it can give you a lot of clarity as to how you want to start and lead the business. You might find the business plan templates listed on our Useful Business Resources / Links thread useful.

    Once you have completed the business plan you could approach one bank and see how that works out. If they are not prepared to give you a loan ask them why and try to get as much feedback from them as possible, so that you can tweak your plan and presentation before approaching the next bank.

    You might also consider some other funding sources such as credit unions or even some government enterprise support agencies.

    Good luck with it and please keep us posted as to how everything is working out for you.
     
  7. TheStar

    TheStar
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    Thanks guys. I will definitely work hard on this. I lost my job yesterday and that was just the last straw!!! I'm through working for [selfish, trifling] people.
     
  8. Fergal

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    Sorry to hear you've lost your job TheStar, I've been there myself and I know how it feels. Keep the chin up and try to see the silver lining. Good luck with everything.
     
  9. Tecknowoman

    Tecknowoman
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    I wholeheartedly agree with Sean and Fergal and mate I'm sorry to hear about your job.

    Before you plan too far, consider having a look around at not just writing a business plan but writing one geared specifically for getting investment in your business. So you are sure to write it in a way that answers investors questions specifically.

    Even if you just consider if I was a bank manager/investor what would I want to know? Seriously if you ask yourself what questions you'd want answered before you'd give your hard earned cash over to this, if you had some spare and this was someone approaching you for your investment.

    To give you an idea I'd want to know what made your restaurant unique? There are so many restaurants, so many fail quickly so what is it you have that no-one else has? Once I know that I am going to want to know how you are going to let other people know those things and how much it is going to cost to tell them. I want to know what your upsell strategy will be to increase your profits. I am going to want to see realistic ideas based on industry research on how I am going to get my investment back, when and my exit strategy! Some of these are big things, they aren't easy to answer but if you do, you can put yourself well ahead in gaining investment. One you present yourself as absolutely genuine and committed enough to do the hard yards in proving how you're going to make it work, realistically in the market you are entering and second you provide great information on how you are actually going to achieve that in reaslity.

    Good luck with it & remember adversity makes you stronger, powerfully desperate. Adversity makes you focus!
     
  10. creditreport

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    Without a good credit, no one will be able to get loan for his/her business. If you are really thinking of starting a business, you should check your credit score first.
     
  11. phpadmin

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    Once you have completed the business plan you could approach one bank and see how that works out. If they are not prepared to give you a loan ask them why and try to get as much feedback from them as possible, so that you can tweak your plan and presentation before approaching the next bank,
     

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