Whether you are applying through CADDA, SBA, or a traditional bank for a loan, there are certain factors that determine your ability to obtain financing. These questions will help you determine if you qualify.

Do you have a good personal credit history? 

Research indicates that good personal credit is one of the most important factors in identifying borrowers that will repay their commercial loans. Many loan programs require perfect personal credit in order to qualify.

• If you do not have a current credit report order one by calling Equifax at (800) 685-1111 or visiting their website at www.equifax.com .
• If you have credit problems but they can be explained but a one-time incident such as medical problem, provide information on the problem and how it has been rectified.
• If you have had a bankruptcy on the past seven (7) year, or have slow payments, collections, etc then it may be difficult to obtain financing now. If the poor credit history can be explained by a particular incident, supply information on the situation an how you attempted to repair the past credit problems. If you have consistent credit problems, you will need to 'repair' your history and rebuild your credit track history.

Have you filed personal and business income taxes? 

Lenders and government programs alike want to see that an individual has met their tax obligations for both filing and paying taxes. SBA tax verification is obtained from the IRS before a loan is closed.

Are your income taxes paid? 

Many of the loan programs are in partnership with government agencies. These loan programs do not look favorably on individuals who have unpaid income taxes. If your tax liabilities are no current and unpaid, pleas explain?

Have you prepared a business plan for your new venture?

Prepare a detailed business plan, which provides two years o financial projections which include monthly cash flow statements (with the financial assumptions), a beginning and ending balance, a comparison of trade averages, and an analysis of your competition. Identify the cash or equity injection listing both the source and amount. In addition, include how you will market your product or service and why you will be successful.

Do you have experience in running your own business?

Experienced management is very important to establish a successful operation. Inexperienced management is one of the major reasons for failure.  

Do you have enough money of your own to put into the business?

(for start-up businesses)
All loan programs require that the business owner put their own money in the business. This owner equity injection shows that the owner believes in the business enough to risk their own money. Some micro loan programs require only 10% of owner equity, other programs require at least 30% and will look more favorably on a loan request with more equity in the business

Do you have any collateral to secure business loan? 

Business and personal assets can be considered collateral, or a way to repay the loan of the business if the business defaults a loan. Most collateral is valued at an amount less than face value based on a variety of factors. Although the SBA and micro loan programs state the collateral cannot be the only factor that would lead to a denial, the more collateral one has, the more likely a deal will be favorably considered.

Have you demonstrated that your business has the ability to repay a loan? 

(for existing businesses)
If the business is profitable, then there are demonstrated profits to repay some amount of new debt. If a business is not profitable, then it becomes very important to prove how it will be profitable in the near future so that a loan can be repaid. It is very important that you find as much data on comparable business or industry statistics in order to "prove" the revenues you intend to generate and the expenses you anticipate incurring. Classes and counseling can assist you in the process. Intermediaries can make referrals. Classes have a nominal charge.

Does your business have a positive net worth? 

(for existing businesses)
The net worth of the business should be positive. If there are loans from shareholders on the balance sheet and you are able to subordinate these (not pay the shareholders) while you pay the bank loan back, you may consider these loans from shareholders as equity.

Is your business carrying too much debt? 

(for existing businesses)
Businesses that have too much debt will find that their profits are directed at paying back loans and not building retained earnings in the business that can fund future growth. Consequently, banks and government loan programs look more favorably at loan requests that do not add too much debt to the business. Banks often look for a debt to net worth ratio of 4 or less (total liabilities divided by equity). SBA resource counselors can assist you in the assessing your debt situation. Intermediary can make a referral for assistance.

Does your business have managers and advisors capable of leading your business o the next level of growth? 

(for existing businesses)
As businesses expand, they need more sophisticated management as it relates to strategic planning, marketing, record keeping, inventory control, personnel, etc. If there are sectors of your business that you need assistance with, we strongly recommend that you attend one of the entrepreneurial training classes offered in the community, meet with a SBA resource counselor or obtain a referral to one of the many business resources in your area.