What You Need Before You Go to the Bank October 19-20, 2006 Jeff Walker Earl Stanfield.
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Transcript of What You Need Before You Go to the Bank October 19-20, 2006 Jeff Walker Earl Stanfield.
![Page 1: What You Need Before You Go to the Bank October 19-20, 2006 Jeff Walker Earl Stanfield.](https://reader035.fdocuments.us/reader035/viewer/2022070305/551458ab550346284e8b54ce/html5/thumbnails/1.jpg)
What You Need Before You Go to the Bank
October 19-20, 2006
Jeff Walker
Earl Stanfield
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Gather Information
– Pay stubs (1 month period)– Signed income tax returns (2 or 3 yrs.)– Bank statements (2 months)– Purchase contract– Construction contract/plans– Copy of deed– Business plan (start-up or transfer)
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Business Plan
The “road map” for the business. Tells where you want to go and what you need to do to get there.
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Business Plan
• If your idea is feasible
• How much the venture will cost to start
• How much volume you will need to do to stay in business
• What legal structure is best for your situation
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Business Plan
Key Elements:
• Business Description
• Market Description & Analysis
• Operations Plan
• Financial Information & Analysis
• Appendix (Supporting Information)
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Business Description
• Business location
• Owners
• Legal form of business
• History and/or start date
• Recent sales and profit figures
• Classification of business
• Business advisors
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Market Description & Analysis
• Product or service• Target market• Market research & strategy• Competitive analysis• Pricing strategy• Promotional strategy• Distribution• Location synopsis
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Operations Plan
• Logistics
• Suppliers
• Operating regulations
• Human resources
• Risks, problems, & future plans
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Financial Information & Analysis
• Financial statements (last 3 yrs.)
• Interim financial statements (YTD)
• List of all notes & leases payable
• Personal financial statements
• Pro forma statements (projections)
• Break-even analysis
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Evaluate Your Credit
• Credit bureaus–Equifax (800) 685-1111
–Experian (888) 397-3742
–TransUnion (800) 888-4213
• www.AnnualCreditReport.com
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What’s in Your Credit Report
• Identifying information• Trade lines–Mortgage– Installment– Revolving
• Inquiries• Public record & collection items
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How Scoring Works
• Your score is your “FICO” score
• Range is 300 to 850
• No one “score cutoff”
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What a FICO Score Considers
• Payment history (35%)
• Amounts owed (30%)
• Length of credit history (15%)
• New credit (10%)
• Types of credit in use (10%)
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Tips for Raising Your Score
• Pay your bills on time• Keep balances low in relation to credit
limits on revolving credit accounts• Avoid opening a lot of new accounts too
rapidly• Do your rate shopping for a given auto or
mortgage loan within a focused period of time
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What the Lender Considers
5 C’s of Credit
ConditionsCharacterCapitalCapacityCollateral
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Conditions
• Amount & purpose of loan
• Terms/structure of loan
• Environment/industry considerations
• Operational assessment
• Other lending relationships
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Character
• Identification of legal structure• Evaluation of honesty & integrity• Assessment of management ability– Production–Marketing– Financial
• Assessment of credit history
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Capital
• Liquidity–Working capital– Current ratio
• Solvency– Equity ratio– Debt-to-asset ratio
• Trend• Comparison to peers
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Capacity
• Profitability• Cash flow• Reliability of source(s) of repayment– Primary– Secondary
• Capital replacement needs & family living expenses
• Comparison to peers
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Collateral
• Loan-to-value relationship
• Liquidity
• Degree of specialization
• Stability of value
• Durability
• Environmental concerns
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Business Entity Options
• Sole proprietorship• Partnership– General– Limited
• Limited Liability Company (LLC)• Corporations– S Corp.– C Corp.
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Key Documents Needed for Formation
Sole Proprietorship–DBA filing
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Key Documents Needed for Formation
Partnership–Partnership agreement
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Key Documents Needed for Formation
Limited Liability Company–Articles of Organization
–Operating Agreement
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Key Documents Needed for Formation
Corporations– Articles of Incorporation– Bylaws– Organizational Board– Resolutions to Borrow– Stock Certificates– Stock Ledger
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In Review
• Gather & organize your information
• Get your credit standing in order
• Satisfy legal entity requirements