Webinar: How to Prepare to Meet Your Lender

Hi, everyone. My name is Natalie Goreal, and I'm the online media coordinator for the U.S. small Business Administration. I'd like to welcome you to today's webinar. This webinar is made possible through a public private partnership with Dun and Bradstreet Credibility Corp. We're really excited to work with D and B Credibility Corp. Because public private partnerships allow the government and the private sector to come together in support of the small business community. It allows us to hold free webinars like this on a variety of business topics. In just a moment, I'll turn it over to D and B Credibility Corp. Team to help you prepare to meet your lender. But before I do that, I want to say a little bit about why SBA is so excited about this partnership. As small business owners and entrepreneurs, you need more of two Time and money. Our mission at SBA is to provide the nation's 28 million small businesses with the support they need in a world where time and money are both short. We do this through what we call the three Cs. First, SBA provides capital to small businesses in the form of guaranteed loans to start, expand, export, or recover. Ask for a disaster. I will discuss SBA loans later in this presentation. Second, we help small businesses with government contracts, which is a $100 billion market. And finally, what brings us here today is that SBA provides counseling services, often at no cost. Many of you might be familiar with the SBA Resource Partner Network, including Small Business Development Centers, SCORE Mentors, Women's Business Centers, Veterans Business Centers, and our SBA field offices. I encourage you to visit SBA.gov to learn more about what services and events you can find in our resource Portal Partner Network. In addition to the SBA Resource Partner Network, we work with private companies to bring in expertise in high priority areas like access to capital. Access to capital is the number one concern for entrepreneurs and small business owners. Preparation is key to access capital for your business. And so, through this partnership, SBA and Dun and Bradstreet Credibility Corp. Plan to walk entrepreneurs like you through the steps you should take to prepare to meet your lender. With that, I'd like to turn it over to business expert Steve Strauss.

Thank you, Natalie. And hello everybody. Thank you for being with us today. And thank you to the Small Business Administration SBA for hosting this great webinar today. I'm very excited to be talking with you and talking about one of my favorite subjects, access to Capital. As Natali said, my name is Steve Strauss. I own the Senior Small Business columnist For USA Today, written quite a few books, including the Small Business Bible. I run a website called the Self Employed. And with regard to Dun and Bradstreet, I am working with Dun and Bradstreet Credibility Corporation this year at their Access to Capital events around the country. And so what we would like to do with you today is help you understand funding, how to get yourself prepared and what the different funding alternatives and resources that are out there to help you get the money you need to start or run or grow your business. Now, as we all know, small businesses are the backbone of the economy. They are the catalyst for change in neighborhoods. They create community development. They are ripples in the pond of making communities strong and economically. But too often small businesses experience not a few challenges, as we know, when it comes to getting the money they need. One of the things I love about working with Dun and Bradstreet Credibility Corp. This year is that they strongly care about preparing small businesses properly on their growth journey to get the money they need for the business. That's why they created these Access to Capital events across the country. And it's through these events that we're going to see some of the videos that will be shared with you today, which leads us right into today's discussion. So, Stephanie, next slide please. So does anyone remember Cuba Gooding's famous line about money and Jerry Maguire, Tell me if you do. Anyone. Ha ha ha. Little webinar humor there for you. Of course. You said, show me the money. Show me the money. Famously, and I think not a few business people have wanted to yell that from the rooftops, right? But the good news is they got the money for their business and money is out there. Getting the money that you need for your business and getting prepared to meet with your lender is really very doable. If you want proof, just drive down your street of your community, of your neighborhood and look at all the small businesses that line the street. Well, they all got the money they needed to start their business or do a Google search for the number of businesses in your city. There's a lot. Or in the country, in the United states, there are 30 million businesses. 99% of those are small businesses. And all those people got the money too. So they did it. We, we can do it too. So that's what we're going to be doing today, talking about that. Now it could be that a bank loan is what's going to help you grow your business. But do you know how to get that loan? Or have you considered alternative lending options? What about Equity options, getting an angel investor, or even something like crowdfunding. We're going to talk about all those different options today. The good news, as I said, is that there are really a lot of organizations in your local community that have the resources and the assistance to help you prepare. There are three parts to today's webinar, as you can see in the slide in front of you. We're going to be going over these three things. First, these different lending options that I was mentioning. Then preparation. How do you get yourself ready so that they want to say yes to you? Because they do want to say yes to you. So we're going to figure out what you need to do to let them do what they want to do. And then finally, what are the resources available that will help you along your journey? Let's go to the next slide, if we could, please. Thank you. So traditionally, before the not so Great Recession. Right. Let's call it that, the not so Great Recession. Before the not so Great Recession, there were really kind of two ways to fund your business. There was debt financing and there was equity financing. Debt financing is what it sounds like. You take on some debt to get the financing need for your business. So if you look at this chart in front of you on the left middle, you'll see traditional lending. That is a form of debt financing. You get a loan from a bank. Above that, to the right, we have alternative lending. We'll talk about those. And again, that's a form of debt financing. And then one of our favorite options in the world, SBA loans, another form of debt financing. Equity financing is a little different. Equity financing is where you don't take on debt, but you give away a chunk of your business to get some equity in your business to get the money you need. If you ever watch Shark Tank, the sharks want equity in the business. They're not in the business of giving loans, unless you're talking about Mr. Wonderful, maybe. But most of them are in the business of getting an equity stake. So that's it. One of the things that really positively came out of the Great Recession is this idea of crowdfunding, which is a new idea. It's really not equity financing. It's really not debt financing. It's a new animal. What it is is a way for you to get people to invest in your business, and you end up not giving out equity, usually, and not taking on debt. So these different areas are what we're going to be talking about right now. So let's go on to the next slide. All right. So let's talk right now, to start with, about traditional lending, because when we think about getting our business funded, what do we think about? We think about traditional lending, usually, which is going out and getting a bank loan. When people go to fund their business, they usually use a variety of different ways to fund that business. They will go, hopefully get a bank loan or an SBA loan. They might get a loan from a friend or family member. They will use certainly some of their own resources, sweat equity. There are lots of different things people do, but a main chunk for many people is going out and getting a traditional loan. I'll give you an example. I have a friend of mine who's a pilot, and he wanted to augment his retirement, so he decided he was going to start a real estate business on the side. And so he met with a Realtor about buying some investment properties. And the Realtor said, well, the first thing you need to do is go meet with a lender, go meet with a bank, go meet with a banker to get a plan together before we do anything. And this is what I would encourage you to do as well. And that's the first bullet point. You want to start a relationship with a bank early. You don't want to walk in with your finished business plan and hand it to a banker that you've never met and try and get a loan that way. You could do that, and it certainly can work. But a far better way, a much better strategy, is to meet with your banker early. So that's what my friend Jeremy did. He told the banker the plan. They kind of worked out what it would look like. Jeremy then went to the realtor. They found a little duplex. Jeremy got the loan he needed for the duplex, and within three or four years, the duplex had appreciated in value. And next thing he knew, he was able to cash it out in what's called a 1099 exchange, get another bank loan because he had created a relationship with the bank, and then buy a little bit bigger property. And then I just heard about eight months ago, Jeremy cashed out his second property and bought a big apartment house with another loan. And that all happens by creating a relationship with a bank. So that's the good news. Now, you, of course, have to remember that banks have very strict guidelines, as they should. They want to give qualified loans to qualified people. And so you have to make sure that you are going to be well prepared, as we're going to talk about later in the webinar, to show that you can meet all of their different regulations. They're also going to look at your, your personal credit and your business credit. And you want to make sure that those things are going to be in order so that your personal credit shows a very strong debt to income ratio. You don't show a lot of debt versus the income you're making. You paid all your debts on time. You don't have any outstanding debts. And then similarly, as we'll see here in a second, we'll look at your business credit and you're going to, to the extent you can show positive, strong business credit, you're going to put yourself in a really strong position to get the loan, like my friend Jeremy. So let's take an example of someone who got one of these traditional loans. Stephanie, if you go to the next slide, please. What I want to do is share with you a video of a great entrepreneur named Jill Blankenship. And Jill is the CEO and founder of the Frontline Call center, which is located outside of Washington state in the San Juan Islands off in the Sound. And we met Jill at our Access to Capital Money to Mainstream event in Seattle and she shares her story of her experience of traditional funding and how it made a difference in her business and how it helped her and her community grow. So let's take a look at that video right now.

Hi, my name is Jill Blankenship and I'm the CEO and founder of Frontline Call Center. I started this company back in 2005 by recognizing a need to provide year round employment for the people that live here in the San Juan Islands. I started with five agents. We were providing 24 hour customer support for a local barbershop that we set appointments for as well as a local Internet provider. I actually found community capital development through scored. I had really put everything out there, you know, taken all the money I could from friends and family, took a second out of my home. I'm indebted to the sba. I think on one hand it was very exciting to have the opportunity to continue to grow, but the responsibility was really overwhelming. And again, I think it just helped me focus. We've been able to grow. I'd say our average camp count for agents is about 60, 65 that we go up and down depending on the projects that we're working on and certainly the different times of the year. And it's been great to again provide that year round employment for the people up here in the San Juan Islands. And we also provide employment for other people in rural communities in 14 other states.

So Jill is a really good Example of someone we meet at these Access to Capital, Money to Main street events. And I want to tell you about them for a second because they are also another great tool in your funding arsenal. Presented by Dun and Bradstreet Credibility Corp. They are aimed at helping and educating business owners and entrepreneurs on the many ways that you can acquire money and to grow your business, that kind of thing. So there are panels of experts such as myself and lots of lenders, things like that. You can meet one on one with lending representatives from various different banks and various different lenders. It's really quite a unique event that brings business owners and lenders together. It's a really cool tool. So one of the things we do look at is traditional lending. But another thing that we examine, of course, is alternative lending. Let's say, for example, that for whatever reason a traditional lender said no to you. It may be that you have some credit issues or your business is too new or whatever it might be. So then what do you do? What do you do? That is the question. Well, alternative lending may be the best option for you. There are three things to keep in mind when we talk about alternative lending. One is that the loan rates vary fairly extensively. So you want to look really at the fine print of whatever alternative lender that you're going to be talking to. Second, the payback times also vary extensively. You want to make sure that there's no, for example, stiff early payment penalty, that kind of thing. And you want to do your research because not all lenders are created equal. So you want to make sure that you're being realistic, and you want to be realistic about how quickly you can pay back a loan. And you want to make sure that the lender that you found is one that you can work with. So you really want to ask yourself one simple question. Can you afford it? When you go to. I'm going to talk about what these different lenders are here in a second. But when you talk to these different alternative lenders and you find out the terms of repayment, some will be good and some might be tougher. And it might be okay to get tougher as long as you can repay it. Right? That's it. So if taking out the alternative loan is going to cost you more money than it's going to make you, then of course we should rethink our options. But if it's going to make you more money than it's going to cost you, then bingo, that's exactly the kind of alternative lender we want. So who are these lenders that I'm talking about. Well, here at the bottom, you can see community development financial institutions. These are also known as CDFIs. If you Google CDFI in your neighborhood, in your city, you will find a list of CDFIs. They are small, little regional community lenders and they give what are called microloans. So whereas you might go to a bank and try to get a loan for $100,000, you might go to a microlender and get a $5,000 loan or a $10,000 loan. There's community banks, there's community credit unions, and there's merchant cash advance companies. For example, there's something called factoring. So if you've been in business for a while and you have accounts receivable, factoring might be an option, an alternative option for you. Let me tell you about that just for a second. What is a factor? Well, the factor is somebody who will buy your accounts receivable from you. Maybe somebody owes you $20,000 on an account and they're not due to pay it from per your contract for three months. But you need the money now either to service the deal or to run your business or whatever it is. Well, you can sell that accounts receivable to a factor for a percentage and get immediate money. So there is a great alternative lending option. It doesn't depend upon your credit. It does give you immediate money and it's not a bad option at all. So let's go to the next slide for a second. Last May, we hosted an Access to Capital Money to Main street event at the Chicago Navy Tier. That was a really great event. Among the things we did at that event was we had a $10,000 business plan pitch competition for Illinois entrepreneurs only who are looking to start or run or grow their business. And the winning Entry received a $10,000 check from Dun and Bradstreet Credibility Corp. The guy we're going to look at here today was one of the top five finalists, but he didn't get the $10,000 check. His name is Chris Schoenberger of Barbecue Productions. Now, Chris, as I said, didn't win the money, but I would have to say he was the big winner that day because at the day he met an alternative lender called Axion. He also met the Sam Adams Brewing, the American Dream program. And through those two contacts, he got a little bit of money. He took that money, turned it into a new food truck, and now has a much bigger, thriving business. Today, Chris, business is featured on bottles of Sam Adams beer. So if you are an entrepreneur out there in the food business looking for some help with your business. Here's another great tip for you through Sam Adams. Through Accion, there may be help for you. So let's listen to what Chris has to add about alternative funding and the difference it made in his business.

Hi, my name is Chris Schoenberger. I'm the owner and founder of Barbecue productions. I'm a 100% mobile catering service out of around the beach, Illinois. I attended the Access to Capital event in Chicago. Really taught me a lot about how to manage my finances with the business, as well as developing a relationship with my lender, which is Accion Chicago, where we talked about my business and my financial goals and the opportunities of what I want to do with my company. And having Accion Chicago really took my business to a new level every single day. I'm in constant contact with them and I have conference calls once a month where we look over my finances. I am able to go over and ask any type of questions, whether it be regarding to taxes or hiring employees. Having Accion is irreplaceable. The lending institution of Accion Chicago will help you get your business to the next level. And they'll have the moral support and the relationship that you need. Take your business to new levels and new growth.

So there we go. We have another example of how an alternative loan might work. So what I'd like to do now, though, as we move forward beyond alternative loans and look into one of my favorite loan options, which is the SBA Guaranteed Loan programs, I'd like to give it back to Natalie Goriel from the sba.

Great. Thank you so much, Steve. Hi, everyone, it's Natalie again. So I just want to walk you through the SBA loan program. So SBA provides access to capital to entrepreneurship through our loan programs. To be eligible for an SBA loan, your business must meet SBA size standards and be considered small within your particular industry. Now, you can get more information about SBA size standards@sba.gov and you're also required to do business in the United States. So you're probably wondering how the SBA loan program works. SBA doesn't make loans directly to small businesses. Rather, we set guidelines for loans which are then made by our partners. And our partners include lenders, community development organizations, and microlending institutions. The SBA provides a guarantee to these partners that these loans will be repaid in the case that a business defaults on payment.

So.

So to apply for an SBA loan, you must visit an SBA approved lender and for a list of SBA approved lenders in your area, contact your local SBA district office. Again, you'll find our offices listed on our website@sba.gov SBA also offers a variety of loan programs Our Microloan program provides small short term loans to small businesses. We have another program called the 504 Loan Program which provides financing for major fixed assets such as equipment or real estate. And finally, our most popular loan program is the 7 loan in a second I'm going to show you a video about how the 7A loan program works, but before I do that, I just want you to keep in mind that before meeting with the lender, we strongly encourage you to have a business plan in hand. SBA offers a free business plan tool on our website@sba.gov this tool is a step by step guide that helps you create your plan. Your plan then is created in a PDF or in a Word document so you can go in and edit anytime you'd like. Right now I'd like to show you the short video that explains the 7A program which again is a SBA's most popular loan program.

SBA's primary program the 7 Loan Program helps finance startup and existing small businesses when they can't get financing from other sources or from a lender who won't make a loan without an SBA guarantee. It's SBA's most basic and popular loan program, offering flexibility, longer terms and potentially lower down payments compared to other financing options. These loans are not funded by the SBA directly but but banks receive a guarantee that the SBA will repay a portion of the loan if the business defaults on payments. This lets small businesses get loan amounts to fund startup costs, equipment, inventory and working capital. Loans made through the program may be used to start a new business or to acquire, expand, export or continue operating a current business. Specifically, they can be used to purchase new land or equipment, including construction costs or repairing existing capital Purchase an existing business Refinance existing debt Purchase equipment, machinery, furniture, fixtures, supplies or materials Fund short and long term working capital needs. The 7A loan program also helps small businesses in traditionally underserved markets to help drive growth and job creation. The SBA is committed to expanding small small business access to capital in underserved communities. These initiatives offer a more efficient application process for minority, women or veteran owned businesses or a company in a lower income or rural area. To be considered eligible for the SBA 7A loan program. Businesses must operate for profit, have reasonable owner equity to invest, do or Propose to do business in the United States or its possessions and use other financial resources, including personal assets, before applying for a loan. Contact your local SBA district office for a list of participating lenders in your area. Visit sba.govloanprograms to learn more about how the SBA helps small businesses get financing.

So there are a few things I'd like to reiterate about SBA loan programs that I think are really important. I've said here a couple times, they're one of my favorite ways to fund your business. The first is just to reiterate, the SBA does not make the loan itself. It works with SBA lenders with SBA banks to make those loans available. What the SBA does do, though, is guarantee the loan. So if you try and go get a regular traditional loan, as we talked about earlier, and maybe for whatever reason, you couldn't get it, if you can get the SBA to guarantee your loan because you get approved for an SBA loan, well, what happens? Well, all of a sudden, of course, the lender is going to be far more likely to lend to you because the loan is guaranteed. That is the whole idea behind this program. So it really behooves you to find an SBA lender and look at SBA loans. Not only do they have this 7A program, they have a microloan program as well, which is, I think, up to $50,000. These go bigger than that, these 7A programs. There's farm loans, there's loans to buy technology and equipment. So lots of different options here, and it is definitely something I would strongly encourage you to look at. Okay, onto equity funding. So what's equity funding? I think this is the fourth of our five ways of funding a business. Well, equity funding is, as I mentioned in the beginning, where you give a piece of your business away in exchange for the money that you need for your business. Typically, you would work with a angel investor, and they're called angels for a reason, because they're angels. They bring us money for our business. Or if you're a bigger business, you would work with a venture capital firm, a vc, or if you're a very small micro business, you might get an equity investment from your uncle. Bill might say, okay, I'll lend you the money or give you the money, but I wanted some profit sharing or a piece of it like that. Usually, though, equity funding works with businesses that have a unique technology, product or service or app in a really hot space. That is kind of where we hear about equity funding happening the most. It's not the only place it happens, but it is where it happens quite a bit. And in that case, equity funding is a pretty good option. You are going to give, as I said, part of your ownership share away. There is going to need to be some special legal structures. So for example, if you have a sole proprietorship, you really cannot have an equity share partner because when you're a sole proprietor, you and the business are one and the same. And unless you're selling your soul to the devil, you need to sell part of your business. So you need to have created a separate legal entity. Among other reasons. This is why you want to set up a corporation. I am an attorney, although long ago came to my senses, I don't practice anymore. So I do feel comfortable telling you that one of the smartest things you can do, of course, is incorporate your business of some sort S corp or look at llc. And if you want equity funding in particular, you're going to need to have some kind of format like that. I do have a good friend of mine who is on the Turkish version of the show Shark Tank. I mentioned Shark Tank. He is a shark in the Turkish Shark Tank. He did a lot of angel investing, a lot of equity investments. I spoke with him a while ago about things angel investors look for. I'm going to give you his top three things that he says angel investors look for when looking to invest in an entrepreneurial business. Number one is angel investors invest first in the entrepreneur and the entrepreneur team. So you may have the greatest idea in the world, you may have the next Twitter. If you have the next Twitter, you're probably going to get some angel investing. But just so you know, the number one thing that angel investors tend to look at is the entrepreneur. The entrepreneur's background and abilities and skills and enthusiasm and all those things and the team the entrepreneur has created around him or herself. The second thing is that you will need to have four different pitch presentations ready for your angel investor. One, you are going to need to have a business plan no more than 50 pages. Two, it is going to be needed to be condensed. That's a tough sentence down to a PowerPoint of about 20 slides or so. Third, that PowerPoint needs to be condensed into a smaller version of your stuff, into a two page brief and then finally a five minute elevator pitch. So smaller and more condensed versions of the essence of your plan is what an angel investor is going to want to see. And then finally due diligence on your part and on their part is critical so that you know who the angel is, what they look for, what kind of investment they make. Because you want to find an angel investor, an equity partner who invests in your kind of business, and you're going to expect that they're going to do their due diligence about you, that you have all your ducks lined up in a row. So let's take a look at how equity funding works with the next slide and the next video.

I'm Sharon Schneider with Moxy Jean. So we started out with a little bit different business model. It was called Good Karma Clothing for Kids, and it was more like Netflix for baby clothes, where we owned all the clothes and you paid a monthly membership fee and we'd send you seven outfits at a time. And what we eventually realized was that moms found the idea of us owning the clothes to be stressful. And so we, instead of essentially renting it to them, we had to change our business model and say, what if we just sell it to you? Which sounds like a simple change, but it actually changed everything because we went from having one product that was a button on our website that said subscribe to. Now we probably have 10,000 unique products for sale on the site because every outfit has to be photographed and added. We could inch along and grow it incremental and bootstrap it, and it would take us four or five years to kind of start to build up a loyal base, be very, you know, very small. Or we could kind of seek to inject some capital and grow it quickly because it was really going to take more capital certainly than we had to buy the clothes to do the marketing, to get the labor to turn it from raw material into finished product for sale at Mock. So that you have to start with sort of that emotional story, you know, vision that that hooks them and makes them say, I'm going to invest in this company. But then you do have to back it up with, you know, the numbers and the metrics and the story of data to show that they're making a good.

So we met Sharon, the CEO of Moxygene, who we just saw right there at the May 2013 Access to Capital event in Chicago. And I think that last point she made was so important. You have to know your numbers, your investors, your angel investors, your equity partners are going to want to know that you know what you are talking about. You don't make pie in the sky numbers up, but that you have realistic numbers about what your business is and where it's going and what kind of investment they are going to be making. And what kind of return they can expect to make on their investment. That's what you have to show them. With a lender, you need to show that you are going to have enough cash flow to pay back the loan in a timely manner, in full and on time. With an equity investor, what you are going to be looking at is to show them that the business is going to grow enough and that you have an exit strategy strong enough that they will be able to get their investment back and make a significant return on that investment in a fairly short amount of time, a couple years. So that is equity. So let's go on now to the fifth way and the new way we have of funding our business and that is crowdfunding. Woohoo. We love crowdfunding. So crowdfunding is very popular these days because you are asking the crowd to fund your idea. And there are really two ways that crowdfunding works today. If you look at this second bullet point, this is the first way. So under existing SEC law, only accredited investors can use crowdfunding to invest in equity. So that if you were to go onto a crowdfunding site and ask to look to sell equity shares of your business to the crowd, you can only do it because of the way the laws are written these days to accredited investors. But there is another way form of crowdfunding that has gotten very popular as well, and that is called benefit crowdfunding. This is probably what you've heard a lot about too, where you invest in someone's business and you get a benefit back in return. You are not getting an equity share in the business. So you don't have to be an accredited investor. Let's say I'm opening a Steve Sandwich Shop and I need $15,000 and I go to the crowd and I say, hey, let's invest in, please invest in Steve's Sandwich Shop. And if you invest $50, I will name the sandwich after you for a month. And if you invest $250, I will name a sandwich after you for a year, something like that. So that you are getting a benefit, which is you can take your friends into Steve's Sandwich Shop and there is your sandwich named after you. And I'm getting a benefit because I'm getting an investment in my dream and in my business. So that's how benefit crowd working works. And it's pretty interesting because it allows you to pre sell products and pre sell opportunities. There are lots of different places that you can go online to find different sorts of crowdfunding campaigns. Indiegogo is one of the very, very first ones Kickstarter we've all heard about. RocketHub is one. Peer Backers is another one. If you Google crowdfunding in your you might even find a very specific crowdfunding business for your business. There is something called Celiband where people go on and invest in bands and in music and in CDs. To date myself a little bit in the CD or whatever it may be, I see that James Franco has a movie out now called Palo Alto and it's based on a book he wrote called Palo Alto Stories. And James Franco crowdfunded that movie. So how about that? Let's look at an example of how this is going to work. Now in this clip we are going to feature a company called Bohemian Guitars whose co founders Adam and Sean Lee discussed crowdfunding and how it worked with their startup and they shared their experience with the Access to Capital Dun and Bradstreet credibility event in Atlanta. So let's take a look at that if we could. Stephanie.

My name is Shawn Lee and I am the lead engineer, guitar builder at Bohemian Guitars. And my name is Adam Lee and I am the CEO lead of business development for Bohemian Guitars. Well, on a visit to South Africa to visit my family, I came across some oil can guitars that were built.

In the townships in the poor areas. Take an old Shell or a Castrol.

Old beat up oil can and convert.

It into an electric guitar and it's got that aesthetic appeal and then it.

Also has a very interesting tone due to the metallic body.

And I came back and decided I'm going to try to build one for.

Myself and one turned into two and.

Then two turned into and then my friends won it and it kind of.

Just grew from there. I was technically the financer to start things off. Any money that was generated through selling guitars was reinvested into the company. So we started doing more of a proof of concept approach to the company and decided that we'll utilize Kickstarter, try and crowdfund the idea. If it doesn't work, we didn't waste any money and we're not stuck with tons of product that we can't sell. But if it works, then we know we're onto something as far as the product expansion and where we're going. Kickstarter attracted significant interest from buyers across the world. We really focused on attending markets and arts and crafts fairs just to turn over some inventory, get some money in so we can keep the lights on. We've also been trying to get onto discount and sales Sites like Fab and Gilt and Jackthreads. But currently our biggest order to date comes from Urban Outfitters. We just received our largest purchase order. We're currently available online on their website for sale, and we are going to be in their stores this November.

So crowdfunding, another great option to check out. Let's go on to the next slide if we could. Stephanie, thank you. And we are going to start talking now. So there are your five options that we talked about. And how do you prepare yourself to meet with a lender, to meet with a partner, to meet with an equity investor and get yourself ready to get the money that you need for your business? Well, let's find out next slide, please. The first thing you're going to have to think about is your personal credit versus your business credit, because they may be the same thing, but they shouldn't be the same thing. Okay? So what you want to do, as I said very early in this presentation, is make sure that your credit is in order. And this goes both for your personal credit and your business credit. Now, a lot of business owners leverage the personal assets to start or grow their business. And that makes sense. But the risk is it puts your personal credit and your personal assets at risk if the business fails so early on. While this might be necessary to establish business credit, what you want to do is take steps to one, reduce your personal liability and two, boost your business credit. Because business credit, once you establish that, can be very useful in obtaining more loans, more credit lines that can come into play when you're trying to negotiate a lower interest rate or maybe you're negotiating better payment terms with vendors or you're bidding on a government contract or applying for supplier status. Right? Lots of things you can use that business credit for that are going to be very valuable. So your personal credit, of course, is things like your home and your home loan, your student loans, car loans, personal credit cards. Those are very typical personal credit things. Now, a lot of people do use these things to at least initially fund their business, especially maybe credit cards or a home equity loan, that kind of thing. But what you want to do is establish business credit. A building lease can help you establish business credit. Leasing or buying equipment on terms can help you establish business credit. Getting a business loan, right, that really establishes business credit. And your contract even can help you establish business credit. So it really helps you to establish that different credit and to the extent you can, as quickly as you can, separate your personal credit from your business credit and make sure that both are with pretty high numbers. So let's go on to the next slide and I think this might be the last video. I think these videos are cool, but Stephanie, next video please.

Your D and B business credit profile may play a big part in the decision process for banks, credit card companies, insurance companies, and other potential partners. It's important to understand that only business credit shows on a D and B report. Personal credit doesn't. If you're using personal credit for your business, people who look at your D and B credit file to make credit decisions may not see the full picture. You can start building a strong business credit profile at any time. The first step is making sure the information on your profile is accurate. An empty, incomplete or inaccurate file may result in higher premiums, higher interest rates, lost business, or challenges in raising capital. Add company details like the number of employees and financials to your D and B business credit profile. Complete information and positive scores can make your company appear stronger and more stable. Adding positive payment experiences helps show lenders and creditors that your company can deliver on its payment terms rather than paying cash on delivery. Your D and B DUNS number can also help build your business credit profile, even if you're also required to provide your personal credit information. Whenever your company applies for lines of credit terms with partners, and so on. Provide your DUNS number on the application. Use it to negotiate better terms, or negotiate with your long term suppliers to remove the personal credit information from the account after six months or so once your company has proven its trustworthiness. That way, if your partners report your payment history to D and B, your company is rewarded for the payments it's making.

As I mentioned, one of the things that's critical to getting a loan and being prepared to meet your lender is that you do have all your ducks in a row. What I want you to take away, among other things from today's lecture lecture discussion, whatever we want to call it, is that lenders really do want to lend to you. That's their business. They're in the business of lending money and they really like lending money to businesses. The other thing to know about lenders is they don't like taking big risks. They want to take qualified, smart, prudent risks. They are bankers after all, so that makes a lot of sense. And so it's our job as small business people to make their job easier. When you go in to meet with that lender, you want to have all of these things on this list right here ready to show them a description of the business, your historical financial statements, projections and budgets and Again, you want realistic numbers, not pie in the sky numbers, because people can see through that. A schedule of your balance sheet, assets, liabilities, contingencies, things like that. Your accounts receivable, accounts payable inventory, a schedule of fixed assets, your tax returns, personal financial statements, and honest and transparent information about the business management. What's going on. All those sorts of things come in with all those things lined up. And the essence of all of that is that you want to tell your company's story. One of the most basic errors made by loan applicants is not telling why their company needs the money and not revealing why the lender should approve the loan. Even if everything isn't perfect, maybe there's growth in your industry or maybe you're scheduled to partner with a major retailer. What is your story? Don't just say you want a loan and give the documents, but tell the lender and create that relationship. Fine tune your business pitch to include your future prospects, how strong your business is, why it makes so much sense to lend to you, because it's going to help you grow in XYZ ways. So if you have your business in order, have all this information ready, then you're going to be in really great shape to apply for a loan. Next slide. There's a couple of questions you need to be prepared to answer. First is, how are you going to use the money? And do you have enough income to cover all of your personal expenses with the funds left over every month? So the essence of that is, can you pay back the loan on time in full, and what are you going to use the money for? And how is that going to help you grow your business? And then secondly, are you prepared to offer collateral for the loan? Now, not all loans will require collateral, but many will. And are you prepared to do that? There are also some things that you want to avoid. Let's look at the next slide. So you don't want to disqualify yourself before you get through the door. Meaning you've already said to yourself, oh, I can't get the loan, so I'm not going to even apply. That is what we do not want to do. There are ways to get the money you need. There are, as we've seen here today, lots of different options. And by doing your homework and getting prepared, you certainly are setting yourself up to getting yourself. But you will never hit a home run if you don't go up to the plate. That kind of idea. So you got to get up to the plate. You got to go up there and be willing to strike out or hit a home run. So don't disqualify yourself and be prepared to listen to the lender and find out what they are telling you, what kind of feedback they have to give you and ask them, who else should you talk to? What other ideas do you have for me? Where can I go with my business? What else can I do? If you show that you are receptive to their ideas and then you incorporate their ideas, well, heck, you're going to go a long way into getting a yes. And with a little bit of time left, I want to go to the next slide and start talking about the different local and national resources. One more slide please. That are available in your area to help you get the financing you need. Now, the SBA partners with many organizations nationwide that offer help to you for little or no cost. And the general goals of these organizations is is to help you find the finances you need or meet with financial experts. And these are all people who genuinely want to help you grow your business. Whether it's SBA.gov, great website and go to one of their many offices around the country, they'll help you get your loan package ready. The SBDC Small Business Development Centers. Often they are associated with universities, but not always and they will help you plan and develop. They'll help you with manufacturing, research, all sorts of things. And again, this is a resource that's available and out there. One of my favorite friends is score. Score.org, score is a kind of a. As Ken Yancey once said to me, it's like a Peace Corps of entrepreneurs here in this country ready to help you. How cool is that, right? So you can go to score.org and get confidential free counseling, any business subject. Or you can go to one of the many SCORE offices around the country and get help that way. Next slide please. There are Women Business Centers with a network of over 100 community based centers that help with training and counseling. There's Veteran Business Outreach Centers at Veteran, another great resource for you to help you get your business ready and get your loan package ready. There are CDCs, which are certified development companies. There are just a lot of these different SBA partners and organizations nationwide with all sorts of resources available to you. One more slide please. There's CDFIs, which I mentioned earlier. These are private institutions based through the U.S. treasury, community development financial institutions. There's the AEO, the Association for Enterprise Opportunity and there is the Opportunity Financial Network. And this is just some of the resources that are available. If you missed some of these resources, because I did have to barrel through them a little fast so we could answer some questions. Certainly you will be able to watch this presentation later on and catch up with that. I'm sorry, I did have to go through those resources so fast. So if we go on to the next slide, we're going to take questions and answers now, and I'm happy to take any questions you have. If we don't get to your question, please ask your question anyway and we will get you an answer later on. So I'm going to pass it over to my friend Dustin Luther from Dun and Credibility. Dustin, over to you.

Well, thank you so much, Steve, and on behalf of everyone, I want to thank you for this great presentation. I think if people could have their phone lines on, I think you'd hear a lot of clapping. So really, really good stuff. There was a lot of questions came through, and as Steve mentioned, I encourage you to continue to ask them. We did a similar webinar about a week ago with the sba and I got so many great questions, and we're putting them all together and we're publishing them all and making sure that everybody's questions get answered, even if we can't do that here. So with that said, the most obvious technical question came up. Can we get a copy of the slides or will the video be made available, a recording of this? And I just wanted to say, yes, we will be emailing out in the next week or two to everybody with that information. So that one's so easy to take on. I thought I would just get that one off the table. We had a couple more, though. John Hickman had a couple of questions. He was asking, is it possible to use multiple types of funding when getting started?

Oh, bingo. The answer is great question. And yes, that is exactly how you do it. So there might have been a time a generation or so ago where you would go get a loan and open your business. That's really sure that can happen. Far more typical these days. And I think a smarter strategy, so you're not just relying on one having all your chickens and all your eggs in one basket, is to piecemeal together a funding plan so that maybe you use an SBA loan and then you do some crowdfunding and you get some equity financing from somebody you know who would be interested in your business. You use some of your own resources. So there's four things right there that's a better way, because you're not asking any one person or entity to fund your whole business, and they are going to want to see that you have some skin in the game. So you have to show some of your own investment in the business in any case. And it is just an easier risk for everybody if they see there are other people involved in the venture and that they are not being asked to carry the whole load. So I think that is an astute point and an accurate point. Great.

Michelle Guilford asked a question. She was asking, are there SBA loans geared towards nonprofits? Or at least that's how she had kind of a longer question, but I'm going to summarize it that way. Or is it really just geared towards for profit companies?

I don't know if Steve, that's Natalie, please.

Hi there. It's so funny. I just actually answered that question directly in the chat box. So SBA loans are geared for for profit businesses. So you have to be a for profit business to be eligible for an SBA loan. But also if you go to our website and just in the search box, just search nonprofit, there is a resource page that is available that lists some good information about starting a nonprofit.

Great.

Well, there was another question that I thought was very relevant that you could answer as well. Natalie Ricardo Reyes asked, where can I find a list of banks that do SBA 7 loans?

That's a great question. So here's what I suggest you do. I suggest you contact your SBA local office and again, you can go to SBA.gov to find a list of our local offices and it's under the local assistance tab. And just talk to your local SBA office about the active lenders in your area. And usually what happens is our district offices put together like a monthly report about lending activity in the area. And so from there you can see the lenders that are active in your area.

Very, very cool. We got so many great questions here and they just keep rolling in. So thank you everyone for doing this. An interesting one just came through. I hope I'm not saying your name wrong, but Taissa Franks, she says how typical is it for banks to not allow you to repay a business loan early?

Well, every bank is going to have a different standard, but usually, and I'll just say usually, you shouldn't see a prepayment penalty. The bank wants to get paid back and you would like to look for a loan that offer you the chance not to have any kind of prepayment penalty. So it's one of the things you look for and it's certainly one of the things you should be able to find.

Very cool. And Another Mesha Collier, she was asking, she's got existing contracts. Is that the kind of thing that she's got a contract with another business, a B2B contract, should she be including that when she's going to apply for financing in different loan types?

You bet. In fact, that's exactly what a lender is going to want to see. Because as I said, one of the things the bank wants to know is that you're going to be able to service the debt. How do you show that? You show that with your cash flow. You show that with your profit loss statement. You show it with your numbers and your finances. So if you do in fact have a contract, that's fantastic. You want to take that contract and show it to the lender, make that part of your loan package for showing why you're viable, why the loan is viable, how you're going to be able to pay it back, that you're a rock solid investment. Absolutely.

Makes complete sense.

Let me add one more thing, Dustin, that I didn't say earlier, and that is one of the things you're really going to want to have is a business plan. When you go to any lender. I really should have said this in the middle of a presentation, but I didn't. So here we go. You definitely need to have a solid business plan. When you show it to any lender, even an equity partner, they are going to see that you've figured out what your business is going to be. Even if you are already in business, how are you going to use the money? But generally, a business plan is like a flight plan. A pilot would get in his plane from Seattle and fly to Phoenix with a flight plan. He has to know what direction to head in and how he is going to get there and how much gas he needs. Well, that is what you need. That is your business plan. How are you going to get to where you want to go? How much money do you need? Who is the competition? How are you going to market your business and how are you going to succeed? You show that in your business plan. If you do that and you add in your contracts, well, then that's what a lender is going to want to see as well.

Yeah, and hey guys, it's Natalie from SBA again. I just want to plug our business plan tool. As Steve said, a business plan is so important. If you go to SBA.gov on our homepage under SBA Tools, you'll see a box that says create a business Plan. Click on that and you'll get a step by step guide to creating your own business plan.

You know, you answered a question that Mark Sebert asked early on. Does the tool also show an ideal template a business plan creator can work with?

Yeah. So what happens is you have to go in each step and fill in your information and then at the end of the steps you'll end up getting a business plan that's in a Word document. Or you can also do a PDF so it will lay out all the information from each step into the business plan itself.

It makes good sense. A follow up question I think is somewhat related comes here from Pamela Niedzylski. I'm sorry again if I'm saying the name wrong. She says, how do I create a cash flow and profit loss sheets before starting?

Well, what you have to do is. After you, Natalie.

Sorry. So if you go to the business plan tool, we have a step for that where you plug in your numbers.

It's all labeled Go to the business plan tool. They have a step for that.

Sorry, Steve, I didn't mean to cut you off there.

That's a good answer. And I would just say is when you haven't started yet, you don't really know your numbers. So all you can do is give your best estimate, do your research, do the research of your industry, do the research of your business, and then the numbers you're going to give are the numbers that you are thinking logically likely are what you're going to see. So great.

So we are sitting here one minute after noon, I think. Or sorry, noon. I'm on Pacific. I know a lot of you, probably east coast. So 3pm which means that the time is up. I think there's one more question I'd like to ask that came through here and then we'll probably wrap it up. So Steve, there was a question that I thought was interesting and I just, it scrolled up now and I. Oh, don't tell me.

I already lost it. Sorry.

So many questions are coming through and sometimes my little. I lose my scroll right when I'm asking.

That's all right, Justin. So let me just say to everyone, thanks to sba. I would have to tell anyone listening today if I was to tell you there is a federal government agency whose mission is to help you succeed in your business. Would that be of interest? Well, of course it would. The sba. The SBA is one of the best friends any small business can have and there's a lot more resources than we touched on today. So use your SBA office is there if people want to and by the way, the same thing with Den and Bradstreet credibility. If you're thinking about money and you need to figure out how your money is going to work, you should check that out as well. And then if people want to visit me, you can visit me at my website which is the self employed.com and I'm happy to answer any questions that come through there. That's awesome.

Yeah, a few of the questions and some of them are looking at are kind of specific to different niches. People were asking about franchises and real estate. There are so many great questions. I think we're just going to have to answer those in follow up blog posts and other areas that we'll make sure that we get those questions answered in the near future. So I want to be the first here to thank everyone involved. The sba, Steve Strauss, for coming on and helping us really put together what I think was an awesome presentation. Thank you so much.

Great.

Yes.

Thank you everyone for joining the webinar.

Thanks everybody.