MicroLoan WorkshopJunction City, September 23rd

MicroLoan WorkshopJunction City, September 23rd

eDev

About eDev (formerly Lane MicroBusiness)

About eDev (formerly Lane MicroBusiness)

• 501(c) (3) non-profit organization, based in Eugene, Oregon - www.edev.org.

• Primary mission is to help income-qualified individuals start or build businesses and to help rural communities with economic development

• We offer classes, technical assistance, and access to capital through grants and loans.

Agenda

• Introductions – upcoming Junction City classes• What is a microloan• Why eDev is offering microloans• Elements of a microloan application• Five C’s of business loans• How a microloan is evaluated• Examples of requests for loans that will rank

poorly.• Importance of assembling a good loan application

What is a microloan?

• Most start-up businesses can not obtain business loans from banks

• Start-up business owners typically use personal savings, family and friends, and credit cards to fund their start up as well as existing operations

• Existing small businesses are having trouble obtaining capital

• Microloans range from $500 up to a maximum of $35,000

• Number of hoops to jump through

Why eDev is offering microloans

• SBA primarily acts as guarantor on loans originating from banks and credit unions

• eDev was designated an SBA microloan lender in August 2009.

• eDev will initially have $150,000 in microloan funds

• eDev can apply for more loan funds as needed • eDev is responsible for the successful

management and operations of the loan portfolio.• Importance of understanding that we are offering

business loans that need to be paid back.

Five C’s of credit for a business loan

• Character – integrity

• Capacity – sufficient cash flow to pay back the loan

• Capital – net worth

• Collateral – assets to secure the debt

• Conditions – of the borrower and overall economy

Character

• Banks want to put their money with clients who have the best credentials and references. The way you treat your employees and customers, the way you take responsibility, your timeliness in fulfilling obligations - that's character.

Capacity

• What is your company's borrowing history and track record of repayment. How much debt can your company handle? Will you be able to honor the obligation and repay the debt? There are numerous financial benchmarks such as debt and liquidity ratios that banks use before advancing

funds.

Capital

• How well capitalized is your company? How much money have you invested in the business? Banks want to see that you have a financial commitment; that you have put yourself at risk in the company.

Collateral

Collateral represents assets that the company pledges as an alternate repayment source for the loan. Hard assets. Most collateral is in the form of real estate and office or manufacturing equipment. Your accounts receivable and inventory can also be pledged as collateral. Unless you're a business with a proven payments track record, you will almost always be required to pledge collateral.

Conditions

What are the current economic conditions and how does your company fit in? If your business is sensitive to economic downturns, the bank wants to know that you are good at managing productivity and expenses.

Elements of a business plan

• Executive Summary

• Description of company

• Description of products and/or services

• Marketing plan

• SWOT analysis

• Cash flow and income projections

Key question to ask yourself

• What is the compelling reason why a business or an individual would purchase your product or service. What key benefit(s) are you providing to that business or individual that nobody else is providing?

Types of loans that we prefer

• Service type businesses such as janitorial cleaning, landscape maintenance, elderly care services, etc. These types of businesses have a demonstrated targeted need in which people are willing to pay money for those services.

• Purchase of equipment for expansion where there is a demonstrated need.

Examples of requests for loans that will rank poorly

• Request for loans to pay back taxes• Request for loans to pay for back salaries and

wages• Request for loans to pay for current and upcoming

salaries and wages• Request for loans to pay for existing credit card

debt unless you can show a compelling reason

Types of start up businesses that will likely rank poorly

• Restaurants – New restaurants have the highest failure rate of any type of new business. If you are seeking a business loan for a restaurant, we will be much more interested in your financials and demographics rather than your secret sauce for your barbecued chicken.

• Hobbies – Converting a hobby to a business is an extremely difficult proposition. Just because you like your hobby does not mean that other businesses or individuals will want to purchase your products.

Interest rates

• Introductory rate of 4.9% up to $8,500 for business owners with excellent credit scores (above 780), solid business plans, and solid collateral.

• Individuals who do not have excellent credit scores, solid business plans and solid collateral will be reviewed on a case by case basis. For those individuals who do qualify for microloans, the maximum interest rate will be less than 10%.

How to apply for a business loan

• Initial meeting with a loan officer will be set up after you have demonstrated serious interest in a loan. We are offering these microloan general sessions

• Individuals who do not have excellent credit scores, solid business plans and solid collateral will be reviewed on a case by case basis. For those individuals who do qualify for microloans, the maximum interest rate will be less than 10%.

Elements of a microloan application

• Completed Loan Application• Completed business plan • Articles of Incorporation / DBA / Partnership

Agreement• Business financial statements (2 years) & Current

Interim Financials• Prior-year Business and Personal Tax Returns (2

years), as applicable• Financial projections, including revenue and

expense projections for first two years of operation

• Owner’s personal financial statement

Importance of persistence

• If at first you don’t succeed, keep plugging away to provide the requested materials.

• Most people simply drop out of applying for a loan because they judge the process to be too difficult. We are asking questions to help you refine your business model and to be successful.

• If you do get turned down for a loan, you may want to think whether you really should pursue that business.

Contact information

Martin Desmond

1445 Willamette Street, Suite 120

Eugene, Oregon 97401

541-463-4616

desmondm@clearwire.net

www.edev.org