1.  The Plan describes a marketable idea.

Lenders and investors want to see proof that customers want your product or service and are willing to buy it for a price that gains you a consistent profit.

2.  The Plan must show good profit potential in a short period of time.

Because new business ventures are so risky, they are expected to earn at least a 25% annual return, and preferably more.

3.  The Plan targets a clearly defined market with enough size and purchasing power to produce a profit.

 Lenders and investors look for businesses whose target markets are clearly defined. They also prefer large markets with high growth potential, but avoid businesses that try to be “everything to everybody.”

4.  The Plan explains clearly the “competitive edge” your product or service has in the marketplace.

The more unique your product or service is, the better.   Show how you offer the customer something the competitor doesn’t or can’t.

 5.  The Plan shows the company’s ability to control both the quality of the product or service and its delivery.

Dependence upon outside contractors and sales representatives can be considered a potential weakness when quality of delivery, installation, and service of the product is primary to the company’s success.

6.  The Plan shows that managers and employees have the skills and the experience to make the company a success.

Lenders and investors don’t put their money into a business; they put it into its people.  Skilled, experienced managers and employees can make a business work even when resources are stretched thin and conditions are tough.  Lenders and investors also know that experienced managers and employees will improve their chances of getting their money back.

7.  The Business Plan idea is not overly complex.

Trying to do too much too fast—and/or having to educate the consumer about a product’s or service’s benefits–can put a company under before it can even get started.  This applies to expansion plans as well as start-ups.

8.  The Plan shows a personal investment in the business.

If you don’t believe in your own venture enough to invest at least some of your own money into it, no one else will want to either.  “Sweat equity”–unpaid personal time and hard work–can be important, but lenders and investors prefer to see an entrepreneur motivated by a substantial financial stake in the business.

Next week in our Part III conclusion, we will summarize 9-11 and answer the question:   “BUT – What if you aren’t able to secure funding?”

 Compliments of Lew West Business Consultants 

 www.lewwest.com  Blog  www.MyNext30.com

Third Party Lenders are often a good source when banks decline your loan request. When you can show you have a healthy company they are usually able to be more creative than a bank. The criteria still includes showing a history for the business, and that it is capable of making a profit.

Potential lenders or investors are keenly aware of the risk and want a return matching that risk:  the greater the risk involved in the venture, the greater the return demanded.  There are a number of factors they will take into consideration when reviewing your Business Plan, however if you have a solid plan, your chances are greatly improved.  Some of those factors will be discussed next week.

Compliments of Lew West Business Consultants 

 www.lewwest.com  Blog  www.MyNext30.com

You have a new “Concept” or “Idea”.  Congratulations!  Now what do you do?

If the acquisition of capital is your primary goal for your business, then let’s take a step back and see what you need to do.

Many entrepreneurs become so excited with their New Concept they mentally start banking their money – but oops, they don’t have any money.  No problem. They’ll shop their great new concept to the highest bidder, get enough to pay-off their debts, hire the necessary personnel to run the new piece of business and still have a healthy operating budget.  Sounds doable, right?   

And Why Not?  It seems you read about these kinds of successes all the time, don’t you!? 

While you should “never say never”, the reality of the odds playing out, as described above, are right up there with winning the national lottery.  The good news is there are ways to better those odds.

1. Specifically, know who you are going to approach to request funding.  Gather all of the contact information and as much background knowledge as possible about the company and/or the contact person you will be approaching.

To keep rejection to a minimum, search out those investors who have an interest in your industry and specifically your niche focus.  Just because an individual or group has money to invest doesn’t mean your particular niche is of interest to them.  e.g. – if their passion is to build a station on the moon, don’t ask them to fund your fishing rod conversion system.  You will only suffer an unnecessary rejection.  It isn’t personal; the Investor just isn’t interested in your concept no matter how well you have developed your concept and financial information.

Generally the funding options are:

• Banks
• Third Party Investors (includes Angel Investors and industry Investors)
• Venture Capitalists  (be very clear on what they want in return from you)
• Private Lenders  (usually family or friends)

2. Some of the Basics you will need to have ready:

If your “concept” or “idea” is to be taken seriously by any of these investors it must be verified with a well developed business model/plan.  This plan includes how much capital you are going to need and specifically how you are going to use it.  

When you are able to catch an Investor’s interest in your business proposition, the first thing they will do is to review your supporting financials in order to understand if this business proposition supports a sustainable and scalable investment opportunity (on-going profitable growth curve).  If your numbers pass their scrutiny, they will then – and only then – want to:

• better understand the product offering,
• investigate the potential investment opportunity more fully, and
• review your management team. i.e. -do you and your key personnel have the ability and expertise to make it happen?

Your well developed business model/plan will be a major key in the investor’s decision as to whether your concept is worth pursuing.

If you have shown the Investor realistic financials with verifiable backup information, they will then want to review a well developed Business Model/Business Plan.   If they are going to invest their money into your concept, they want an in-depth understanding of the business.

Remember, their business is funding companies with the expectation of receiving a profitable return as soon as possible. They aren’t interested in dreams and they don’t like surprises.  

Great things can happen if you put your concentrated effort, energy and diligence into the development of your business plan.  Pick the Investor with the most empathy and appreciation of your concept, and present realistic financials knowledgeably. 

Build the odds in your favor.

Compliments of Lew West Business Consultants
www.lewwest.com   Blog – www.MyNext30.com

Third Party Lenders are often a good source when banks decline your loan request. When you can show you have a healthy company they are usually able to be more creative than a bank. The criteria still includes showing a history for the business, and that it is capable of making a profit.

Potential lenders or investors are keenly aware of the risk and want a return matching that risk:  the greater the risk involved in the venture, the greater the return demanded.  There are a number of factors they will take into consideration when reviewing your Business Plan, however if you have a solid plan, your chances are greatly improved.  Some of those factors are listed below.

 1.  The Plan describes a marketable idea.

Lenders and investors want to see proof that customers want your product or service and are willing to buy it for a price that gains you a consistent profit.

2.  The Plan must show good profit potential in a short period of time.

Because new business ventures are so risky, they are expected to earn at least a 25% annual return, and preferably more.

3.  The Plan targets a clearly defined market with enough size and purchasing power to produce a profit.

 Lenders and investors look for businesses whose target markets are clearly defined. They also prefer large markets with high growth potential, but avoid businesses that try to be “everything to everybody.”

4.  The Plan explains clearly the “competitive edge” your product or service has in the marketplace.

The more unique your product or service is, the better.   Show how you offer the customer something the competitor doesn’t or can’t.

 5.  The Plan shows the company’s ability to control both the quality of the product or service and its delivery.

Dependence upon outside contractors and sales representatives can be considered a potential weakness when quality of delivery, installation, and service of the product is primary to the company’s success.

6.  The Plan shows that managers and employees have the skills and the experience to make the company a success.

Lenders and investors don’t put their money into a business; they put it into its people.  Skilled, experienced managers and employees can make a business work even when resources are stretched thin and conditions are tough.  Lenders and investors also know that experienced managers and employees will improve their chances of getting their money back.

7.  The Business Plan idea is not overly complex.

Trying to do too much too fast—and/or having to educate the consumer about a product’s or service’s benefits–can put a company under before it can even get started.  This applies to expansion plans as well as start-ups.

8.  The Plan shows a personal investment in the business.

If you don’t believe in your own venture enough to invest at least some of your own money into it, no one else will want to either.  ”Sweat equity”–unpaid personal time and hard work–can be important, but lenders and investors prefer to see an entrepreneur motivated by a substantial financial stake in the business.

9.  The Plan lays out a clear, well-conceived, workable strategy for getting the business up and running or taking it to the next level.

Nothing scares off lenders and investors faster than an entrepreneur who has no time to prepare a business plan that lays out a clearly defined, workable business strategy. Preparing a plan is an essential ingredient in making a business venture work. There are no shortcuts!

10.  The Plan contains realistic financial projections.

Realistic projections are so important to potential lenders and investors who, just as you do, want to be sure that the “dollars and cents” of the deal make sense.  Most entrepreneurs underestimate the amount of money needed then fail simply because they didn’t request the actual funds required to succeed. 

11.  The Plan communicates the vision for the business and why it will succeed in a clear, concise fashion.

Now is another occasion for you test the caliber of your plan. Many times you must sell your idea on paper before you get the opportunity to explain it in person. Lenders and investors formulate opinions about entrepreneurs and their business ventures based on first impressions, which usually is from the pages of your Business Plan.

BUT – What if you aren’t able to secure funding?

If you are unable to secure funding from the outside, then you need to refocus your efforts to nurture and build the business you currently have. 

• Seek out and stem on-going leaks of cash flow.  There are always expenditures that can be reduced or cut.
• Study your plan to find overlooked or underdeveloped sources of revenue and assets.  Sometimes just a tweaked application or an alternative presentation can add to the bottom line.

Even though growth may be slower without outside funding, you will be establishing a stronger and more efficient business base.  When funding becomes available, you will be ready. 

Compliments of Lew West Business Consultants 

 www.lewwest.com  Blog  www.MyNext30.com

What Banks are Making these Loans?

A listing of banks in each state that have offered the SBA ARC loan can be found on the following website:

http://www.sba.gov/recovery/arcloanprogram/index.html

Once you open it, scroll half way down this page and click on:

 “List of lenders who have made ARC loans to date”

What is the ARC Loan?

Business Borrowers Alliance has posted a helpful, in-depth explanation of the ARC loan behind the link below:

www.Businessborrowersalliance.org

Contact for more info – Only one page of info is reproduced here, but Neal Gordon can be contacted if more information is desired.

The following is from Business Borrowers Alliance Website:

About the ARC Loan Program

ARC loans can be used to make payments of principal and interest, in full or in part, on one or more existing, qualifying small business loans for up to six months. ARC loans provide an immediate infusion of capital to small businesses to assist with making payments of principal and interest on existing debt. These loans allow borrowers to redirect cash flow from making loan payments to investing in their businesses, to help sustain the business and retain jobs. For example, making loan payments on existing loans with proceeds from an ARC loan can allow a business to focus more funds on core operations, such as buying inventory or making payroll.

ARC loans are interest-free to the borrower, carry a 100 percent guaranty from the SBA to the lender, and require no fees paid to SBA. Loan proceeds are provided over a six-month period and repayment of the ARC loan principal is deferred for 12 months after the last disbursement of the proceeds. Repayment can extend up to five years.

ARC Loan Eligibility

ARC loans are available to viable, for-profit small businesses in the U.S. that have qualifying small business loans and are experiencing immediate financial hardship.

Your small business must be an established business, have financial statements demonstrating it was profitable in one of the past three years, and be able to project sufficient cash flow to meet current and future loan payments over a two-year period from loan approval. If your business does not meet these criteria, you can discuss your eligibility with your lender. ARC loans are not designed for start-up businesses.

Examples of qualifying loans may include credit card obligations for your business, capital leases, notes payable to vendors/suppliers, Development Company Loan Program (504) first lien loans, other loans to small businesses made without an SBA guaranty, and loans made by or with an SBA guaranty on or after Feb. 17, 2009.

ARC loans are designed to help businesses experiencing immediate financial hardship for reasons such as

* Loss/reduction of customer base

* Increase in cost of doing business

* Loss/reduction of working capital and/or loss/reduction of short term credit facilities

* Inability to restructure existing debts due to credit restrictions

* Loss/reduction of employees (intellectual capital)

* Loss/reduction of major suppliers (major suppliers out of business)

Where do I get the forms?

You may download generic SBA forms if you think you might want to do this you can visit Business.gov and download the forms at:

http://www.business.gov/finance/financing/loans/sba-loans/sba-loan-application.html

or a better suggestion would be to directly contact your bank and ask for the SBA ARC Loan officer. Many banks have customized these forms, so when you apply at a specific bank for a loan you will still need to fill out their preferred forms.

Critics say the $35,000 loans aren’t enough to help the vast majority of small businesses, while lenders grumble over the paperwork.

Small businesses are still struggling to get their hands on a share of the stimulus package passed in February.

A new program from the Small Business Administration could help them grab some of those stimulus dollars while easing creditors off their backs at the same time.

America‘s Recovery Capital or ARC loans are available in amounts of up to $35,000 for small businesses that are at least two years old, and must be used to pay down existing debt. In order to be eligible, a business must have been profitable in at least one of the last two years, facing hardship, and able to project the earnings and ability to make good on current and future loan payments.

The prevailing criticism potential lenders have for the ARC loan is that an interest rate of only 2 percent above prime on $35,000 simply isn’t worth banks’ time. The daunting paperwork and requisite man-hours, they say, outweigh the nominal return.

The interest, however, is not the only reward the ARC loan brings to the table for business owners. Because the ARC loan must be used to pay off preexisting debts, banks could lend only to customers who will hand the money right back as payment on an outstanding debt, in a revolving door-like plan to both recoup outstanding loans and earn interest simultaneously.

“This program makes it very difficult for banks to do the right thing, even if they wanted to,” says Neal Gordon, principal of Business Borrowers Alliance, a company that helps usher businesses through the ARC loan process, which the SBA says carries about as much paperwork as the popular 7(a) loan program that is available up to $2 million.

If some lenders find this two-way gain a reason to include themselves in the program, others see it as a good excuse to exclude loan-seekers who don’t already carry a debt with the bank, which Gordon says will leave many companies out in the cold.

“This is just an interim solution to help small businesses in a very tough time,” says Haley Matz, press secretary for the SBA.

Despite lingering doubts about the overall efficacy of the program, Gordon, agrees that anything helps. “You’re talking crumbs to starving people,” he says. “It will help certain businesses.”

And for those businesses that can manage to receive one of these 100 percent-guaranteed loans, any amount of money is sure to help. The loans will be distributed over a six month period and repayment will not begin until a year after the final installment. From there, borrowers will have up to five years to repay the full amount.

Third Party Lenders are often a good source when banks decline your loan request. When you can show you have a healthy company they are usually able to be more creative than a bank. The criteria ………………

still includes showing a history for the business, and that it is capable of making a profit.

Potential lenders or investors are keenly aware of the risk and want a return matching that risk: the greater the risk involved in the venture, the greater the return demanded. There are a number of factors they will take into consideration when reviewing your Business Plan, however if you have a solid plan, your chances are greatly improved. Some of those factors are listed below.

1. The Plan describes a marketable idea.
Lenders and investors want to see proof that customers want your product or service and are willing to buy it for a price that gains you a consistent profit.

2. The Plan must show good profit potential in a short period of time.
Because new business ventures are so risky, they are expected to earn at least a 25% annual return, and preferably more.

3. The Plan targets a clearly defined market with enough size and purchasing power to produce a profit.
Lenders and investors look for businesses whose target markets are clearly defined. They also prefer large markets with high growth potential, but avoid businesses that try to be “everything to everybody.”

4. The Plan explains clearly the “competitive edge” your product or service has in the marketplace.
The more unique your product or service is, the better. Show how you offer the customer something the competitor doesn’t or can’t.

5. The Plan shows the company’s ability to control both the quality of the product or service and its delivery.
Dependence upon outside contractors and sales representatives can be considered a potential weakness when quality of delivery, installation, and service of the product is primary to the company’s success.

6. The Plan shows that managers and employees have the skills and the experience to make the company a success.
Lenders and investors don’t put their money into a business; they put it into its people. Skilled, experienced managers and employees can make a business work even when resources are stretched thin and conditions are tough. Lenders and investors also know that experienced managers and employees will improve their chances of getting their money back.

7. The Business Plan idea is not overly complex.
Trying to do too much too fast—and/or having to educate the consumer about a product’s or service’s benefits–can put a company under before it can even get started. This applies to expansion plans as well as start-ups.

8. The Plan shows a personal investment in the business.                                                                                                        If you don’t believe in your own venture enough to invest at least some of your own money into it, no one else will want to either. “Sweat equity”–unpaid personal time and hard work–can be important, but lenders and investors prefer to see an entrepreneur motivated by a substantial financial stake in the business.

9. The Plan lays out a clear, well-conceived, workable strategy for getting the business up and running or taking it to the next level.
Nothing scares off lenders and investors faster than an entrepreneur who has no time to prepare a business plan that lays out a clearly defined, workable business strategy. Preparing a plan is an essential ingredient in making a business venture work. There are no shortcuts!

10. The Plan contains realistic financial projections.
Realistic projections are so important to potential lenders and investors who, just as you do, want to be sure that the “dollars and cents” of the deal make sense. Most entrepreneurs underestimate the amount of money needed then fail simply because they didn’t request the actual funds required to succeed.

11. The Plan communicates the vision for the business and why it will succeed in a clear, concise fashion.
Now is another occasion for you test the caliber of your plan. Many times you must sell your idea on paper before you get the opportunity to explain it in person. Lenders and investors formulate opinions about entrepreneurs and their business ventures based on first impressions, which usually is from the pages of your Business Plan.

BUT – What if you aren’t able to secure funding?
If you are unable to secure funding from the outside, then you need to refocus your efforts to nurture and build the business you currently have.
• Seek out and stem on-going leaks of cash flow. There are always expenditures that can be reduced or cut.
• Study your plan to find overlooked or underdeveloped sources of revenue and assets. Sometimes just a tweaked application or an alternative presentation can add to the bottom line.

Even though growth may be slower without outside funding, you will be establishing a stronger and more efficient business base. When funding becomes available, you will be ready.

Compliments of Lew West Business Consultants
lewwest@lewwest.com www.lewwest.com