FREQUENTLY ASKED QUESTIONS
VALDOSTA STATE UNIVERSITY
SMALL BUSINESS DEVELOPMENT CENTER
How do I know how much money I will need?
Funding needs are usually determined by adding the amount of money needed to cover one-time startup costs including buildings, leasehold improvements, equipment, inventory and working capital for expected operating expenses. For additional information, you may want to purchase Mastering Loan Proposals or contact your local SBDC.
How do I get a loan?
Lending institutions typically look for the 5 C's when evaluating loan applications. The 5 C's are credit, character, collateral, cash and capacity. Lenders will expect business owners to contribute their own money to the development of the business before they will consider loaning money to a business owner. They also make decisions based on credit score, good character and ability of the business to pay back the loan. For detailed instructions on developing loan proposals, refer to the SBDC publication Mastering Loan Proposals. For further assistance preparing a loan proposal, contact your local SBDC.
Are there non-traditional loan sources?
Yes. There are several kinds of non-traditional sources of financing such as microlending programs, angel investors, venture capitalists and various other non-bank lenders.˜ For a list of some non-traditional financing sources, click here.
What documents will I need to apply for a loan?
Typically, you will need a personal financial statement, tax returns for the last three years (if currently in business, both business and personal tax returns), as well as copies of contractual agreements (for example, a copy of a lease). Depending on the situation, lenders will likely want to see a business plan, or at a minimum, financial statements demonstrating how the loan will benefit the business and be paid back. If you are seeking financing for your business, you should consider purchasing our Mastering Business Loan Proposals book.
Is my credit score important when applying for a loan?
Credit scores are a critical decision factor in evaluating a loan application. Most financial institutions consider the way a person handles his or her personal credit a good indicator of how business credit will be handled. Prior to applying for a loan you should obtain a copy of your personal credit report along with your credit score. Even with a great business plan, a poor credit score can prevent you from getting a loan. The SBDC can help you asses the impact of your personal credit score on business financing.
How do I find out what my credit score is?
You can obtain your credit score from each of the three major credit-reporting agencies as well as other independent organizations. Unlike your free credit report allowable twice a year under Georgia law, you may have to pay a fee to obtain your credit score. Some independent organizations may offer a free credit report and credit score, but there is often a catch. It is important that you check these organizations for references before you provide them with personal information.
Are there government grants for my business?
Generally, there are no government grants available for small businesses. In fact, the term "grant" may be a misnomer, since grants simply pay for services the government needs done. Most government grants are awarded to non-profit organizations or local governments, not to private companies. One possible exception is for companies developing or exporting agricultural goods, including food and forest product. If you think you may qualify for one of these, click on reference. Another exception could be the SBIR or STTR programs, which fund the research and development of technological innovation that meets specific government needs. For more information on these programs, click on www.sba.gov/SBIR.
Does the SBDC provide financing?
No. The SBDC is an economic development program of the University of Georgia system and does not lend money. SBDC Consultants can help you identify sources of funding to best fit your financial needs.
Can I get an SBA guaranteed loan to refinance present debt?
Yes, if the debt is a business debt (i.e. not personal) and the refinance must result in a minimum of 20 percent improvement in cash flow.
Can the SBA lend me money?
No, the SBA does not directly lend money. However, it does provide guarantees which eliminate some of the risk to its lending partners, such as banks, community development organizations and microlenders. SBA partners lend money to small businesses based on the guidelines for each of its three loan programs. For more information, click on http://www.sba.gov/financing/sbaloan/snapshot.html.
What are angel investors and how do I find them?
An angel investor is a wealthy individual who provides capital for early stage or start-up businesses, usually in exchange for an ownership stake in the company. Angels often provide funding for businesses that need more capital than is available through personal and family investments, but are not large enough to attract venture capitalists. Angel investors often organize themselves into angel networks or angel groups to share research and pool their own capital. For more information, click on www.angelcapitalassociation.org or www.angelcapitaleducation.org.
How can I get access to venture capital?
As a rule, venture capitalists do not lend to small businesses because the large amount of dollars they invest (millions) are beyond the scope of most start-ups. In a situation where venture capital is an option, investors will look to share in the profits of the business and will expect a huge return in a relatively short period of time. For more information on venture capital, click on www.vfinance.com.
Are there grants for minority-owned businesses?
No. There are no grants available for minority-owned businesses. Grants are available for established nonprofit organizations for the purpose of training, community development or technical assistance.
Do certain groups get preferences on government lending programs?
No. Eligibility to qualify for an SBA-guaranteed loan is based on size standards and must be a for-profit business. However, the SBA Community Express loan program targets businesses owned by minorities, women and veterans as well as businesses located in HUB zones.
I've heard that foreign nationals get free money to start a business. Is that true?
No. Foreign nationals don not have access to free money. They use the same traditional and non-traditional financing sources to start their own businesses, as well as community-based financing options.
Are there special loan programs for minorities?
The SBA Community Express Loan Program is offered to designated geographic areas serving mostly low and moderate income areas and minority, women and veteran-owned small businesses.
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