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Microloan presentation - JC

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					   MicroLoan Workshop
Junction City, September 23rd
           eDev
                 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

				
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