Guide on how to apply for SBA loans
1. Analyze Your Situation: Were you denied a conventional loan from a commercial lender? If not, you are not eligible to apply for a SBA loan…yet. In order to be eligible for an SBA Loan, you must apply and be turned down for a conventional loan by a commercial lender. By law, the SBA may not guarantee a loan if a business can obtain funds on reasonable terms from a bank or other private source. A borrower therefore must first seek private financing.
2. Prepare a Meeting With a Lender: Lenders under any of the SBA Loan Programs will ask most of the same questions and need similar information, different from your applying for a traditional or conventional loan without the SBA’s assistance. The SBA recommends that you plan to bring the following information and documentation to your meeting with your lender when applying for a loan under any of its loan programs:
1. Prepare a Business Plan- A written document describing your business, including type of business and legal form; annual sales; number of employees; length of time in business; and the ownership structure. Click on the following link and participate in the free online tourtorial: http://www.sba.gov/smallbusinessplanner/plan/writeabusinessplan/SERV_STRATPLAN.html
2. Prepare Financial Statements (Business)- Complete financial statements for the past three years and current or interim financial statements. Click here to learn more about the different kinds of money your business is using or will use: http://www.sba.gov/smallbusinessplanner/start/financestartup/SERV_FINANBASICS.html
3. Prepare Financial Statements (Personal)- Each owner, partner, officer, and stockholder owning 20 percent or more of the business must also provide a financial statement. Click here to learn more about how to improve your personal statements: http://www.sba.gov/smallbusinessplanner/start/financestartup/SERV_CREDREPORT.html
4. Create a Loan Request- This is a description of how the loan proceeds will be used, along with the purpose, amount of loan request, and type of loan requested. Click on the following link for another free tutorial: http://web.sba.gov/sbtn/registration/index.cfm?CourseId=28
5. Prepare a list of Collateral- A description of the collateral that will be used to secure the loan; description of equity in the business; potential to borrow funds; and availability of any cash.
6. Prepare a list of Management Resumes- These are the resumes of those who will be involved in operating the business, their experience, and a detailed list of what they bring to the business.
At this point, you will need to be prepared with the required SBA Loan documents to discuss with your lender. While the SBA suggests bringing only the above documents with you when applying for funding, it also offers a detailed "Checklist of Required Papers to be Obtained from Applicants SBA/Funding," which provides a much better idea of what it really wants from borrowers. This information is as follows (It is a list of about 14 things):
o Application for Loan. Click on this link. It will be very useful: http://www.sba.gov/services/financialassistance/loanapplication/index.html
o Statement of Personal History. A "Statement of Personal History" is required for each principal applying for a 7(a) loan
o Personal Financial Statement
o Balance Sheet and Profit & Loss Statements
o Projection of Income & Finances
o List of Names and Addresses of any Subsidiaries and Affiliates
o Certificate of Doing Business
o Signed Business Federal Income Tax Returns for Previous Three Years.
o Signed Personal Federal Income Tax Returns for Previous Three Years.
o Brief History of the Business and Its Problems, including Explanation of Why SBA Loan is Needed.
o Copy of Business Lease.
o Additional Documents If Proceeds Will Be Used to Purchase Existing Business.
Since the decision to lend to your business will largely be based on your financial statements, pay particular attention to providing careful, accurate, and complete statements.
How to recognize and avoid small home business scams
1. The first rule of any business opportunity is this: If it sounds too good to be true, it probably is.
2. Check if your potential business opportunity is listed as a known Work-At-Home Scam. One good list, provided by the Better Business Bureau, is located at:
3. Some important signs that could signal a home business scam are:
a. Unrealistic promises of future earnings (Earn lots of money fast)
b. You must pay to work—buying materials, training, membership fee, etc.
c. Hype advertising
d. A lack of professionalism, especially proper communication
e. Little (or inaccurate) description of what the job entails
f. You must call a 1-900 number – you must pay to call these numbers
g. You must recruit others before you can make any money
h. A lack of focus on selling a product or service to consumers
4. Research the company offering you the opportunity. Three organizations that help you do this are the Better Business Bureau, the Federal Trade Commission, and Scam.com. Their sites can be found at:
Be sure to check if the company you are researching has a history of complaints. However, a lack of complaints does not guarantee legitimacy. Companies may change their names or move location.
5. Six important questions to ask before accepting any work-at-home opportunity are:
a. What tasks will I have to perform? (Be specific!)
b. How will I be paid? (Salary or commission?)
c. Who will pay me?
d. When will I receive my first paycheck?
e. What is the total cost to me for this work-at-home opportunity, including supplies, equipment, and membership fees?
f. What will I get for my money? (If you must pay money to participate)
If the company’s answers to these questions are not complete or seem suspicious, avoid the company.
6. Be sure to keep a complete record of your dealings with any company. This includes phone calls, emails, paper mail, and especially money.
7. If you are a victim of a home business scam, ask the company for a refund of any money you paid them. If they refuse, contact law enforcement officials and report them to the Better Business Bureau so that others do not fall victim. Contact:
a. The Federal Trade Commission at 1-877-FTC-HELP
b. The Federal Trade Commission Complaint Filing:
c. The Better Business Bureau Complaint Filing https://odr.bbb.org/odrweb/public/GetStarted.aspx
8. For more in-depth information, two very good websites with more information on home business scams are:
a. The BBB: http://www.bbb.org/alerts/article.asp?ID=436
b. The FTC: http://www.ftc.gov/bcp/menus/consumer/invest/workhome.shtm
How to utilize the section 179 deduction
Directions: The section 179 deduction allows business to claim tax deductions for buying or leasing equipment used fully or partially by the business.
There are many great resources that can help with understanding how to use the section 179 deduction. These instructions come from www.section179.org
1. First you need to fully understand what the section 179 deduction entails as well as the basic explanation of the tax savings that can be obtained by using it. An explanation can be found at this link. http://www.section179.org/section_179_deduction.html
2. Second you need to find out what equipment qualifies for the section 179 tax deduction. A guide to which kinds of equipment qualify can be found at http://www.section179.org/property_that_qualifies_for_section_179.html
3. Now that you know what the section 179 deduction is and what types of equipment qualify for this deduction you can start to calculate the tax savings that are available to you. www.section179.org gives you access to a deduction calculator that will guide you in your calculations. The calculator is located here http://www.section179.org/section_179_calculator.html To use the calculator you will need to enter the cost of the equipment. The calculator will then output the values for the section 179 deduction, the 50% bonus depreciation deduction, the regular first year depreciation deduction, the cash savings on your equipment purchase, and the lowered cost of your equipment after tax savings.
4. The economic stimulus act of 2008 made some changes to the section 179 deduction and information regarding these changes can be found here http://www.section179.org/stimulus_act_2008.html
5. Leasing equipment can qualify for the section 179 deduction as well as purchasing equipment. Read the article at this link to understand how leased equipment can be included in the section 170 deduction. http://www.section179.org/section_179_leases.html
6. If you have any other questions about the section 179 deduction there is a list of FAQ’s located at this link. http://www.section179.org/section_179_faqs.html
7. To contact someone about questions that are not answered in the FAQ’s you can send an email to WebEditor@Section179.org