CONSUMER CREDIT COUNSELING SERVICE

Document Sample
CONSUMER CREDIT COUNSELING SERVICE Powered By Docstoc
					ACCION Texas


     Financing your
     Business During
     Tough Times
ACCION TEXAS
   Non-profit agency, established in San Antonio
    1994 – the largest micro lender in the Country
   The mission of ACCION Texas is to provide credit to
    small businesses that do not have access to loans from
    commercial sources. Through its loans and
    services, ACCION Texas helps microentrepeneurs
    strengthen their business, stabilize and increase their
    incomes, create additional employment and contribute
    to the economic revitalization of their communities.
ACCION TEXAS Staff
Introduction
   Shirley Brooks – Regional Director
    –   I have worked for ACCION for 7 years
    –   Year-to-date we have loaned out over $1.9M
    –   Telephone (1-866-312-3774)
    –   7100 Regency Square, Suite 103, Houston Texas
        77036
    –   Website (www.acciontexas.org)
   Bridget Ross - Loan Officer
Disaster Recovery Loan for
Small Businesses 2%
   Existing Businesses affected by Hurricane Ike
   Maximum Loan amount is $5000.00
   Flexible on Collateral
   Proof of having a business and bank
    statements
   Not Credit Score Driven
         This is NOT the time
for Knee jerk reaction regarding
your Business Financials:
   How we handle money impacts our personal
    lives and our businesses
   A Checkbook is a theological document; it tells
    you who and what you worship.
                             Billy Graham
Surviving the Tough Times

   Analyze Your Situation
   Set Financial Goals for Your Money
   Create a Budget for your Personal
    Lives and Business
   Develop a Banking Relationship
   CPA, Insurance Agent,
     and Attorney
 GOALS WORKSHEET
Short Term       Cost       Target Date   Monthly
(up to 1 year)
Television       $300.00    6 months      $50.00

Mid Term         Cost       Target Date   Monthly
(1 - 5 years)

Vacation         $1000.00   18 months     $55.55

Long Term        Cost       Target Date   Monthly
(5+ years)

Retirement       $100,000   30 years      $277.77
       Finding Money for Your
    Business During Tough Times
   Personal Saving (this is a primary source of
    funding for micro-businesses)
   Friends and Family
   Banks (this is the most common source of
    funding)
   Alternative Lenders (ACCION)
   Venture Capitalist Group
   Factoring (ACCION)
Underwriting Guidelines for Credit


   Capacity - (please see Monthly Financial
    Sheet) – This is by far the most important
    element in determining your ability to repay the
    loan. A business ability to prove it can cash
    flow is demonstrated on the financial sheet
    hand out.
Ability to Repay MUST be:




       Unquestionable!
                    Capacity
   If start up or existing business - not able to
    prove cash flow then an alternate source of
    income is required.
   Financials are Required (Tax Returns, P&L’s,
    Balance Sheets, and Bank Statement)
   Debt-to-Income .50 (including new loan)
   30-40% of your available revolving credit
   Liquidity (your investment into the business
NET MONTHLY INCOME

First Salary. . . . . . . . . . . . . . . .
                . . $_________
Spouse’s Salary. . . . . . . . . . . . . .
                   $_________
 Part-Time Job. . . . . . . . . . . . . . .
                  .$_________
 Child Support. . . . . . . . . . . . . . .
                  .$_________
 Other. . . . . . . . . . . . . . . . . . .
EVALUATE TOTAL MONTHLY
INCOME
   Determine take home pay
   Examine other income sources
NEEDS VERSUS WANTS
WHAT IS CREDIT?
   Definition
   Credit worthiness
    –   Capacity judged by earning power and current
        financial commitments
    –   Character determined by honesty, reliability,
        willingness to pay
    –   Collateral measured by financial resources
            Income, home equity, business or household goods,
             automobiles, life insurance, savings accounts
 Underwriting Guidelines for
           Credit
 Bank Credit Score Requirement – 670 and
  above (please understand that they look at
  more then your score)
 Age of Credit (Established Credit)
 Type of Credit
 Third party record of your financial history
 bottom line your credit report is a indication
  of your Character. How you pay others is
  probably how you will pay them
         ACCION Texas Credit
Score Requirements for Loan
Amounts:

   650 – You may apply for loan amount
    up to $100,000.00 (secured by land
   650 - $50,000.00 (Equipment, F&F,
    Vehicles 10 years are older)
   630 - $35,000.00
   600 - $25,000.00
   550 - $12,000.00
   500 - $8000.00 under 500
What Makes Up a FICO Score
   Payment History - 35%
   Balances Carried  30%
   Credit History    15%
   Mix of ACCOUNTS 10%
   Inquires          10%
DEVELOP BILL PAYING PLAN
   Know payment amounts and due dates
   Establish personal pay day
   Determine set-aside expenses
    –   Review Bill Paying Plan
HOW TO PAY EXPENSES
          Most expenses
           –   Best paid by check, money order, online
          Have good payment records
          Some payments best handled by
           weekly cash basis
          Research shows
           –   People more conscious of spending
               paying cash
                   More likely to stay within pre-set limits
CREDIT ADVANTAGES
   Credit
    –   useful in times of emergency
    –   Sometimes easier and more convenient than cash
    –   Allows you to make major purchases
            Car
            House
    CREDIT TERMINOLOGY

   Adjusted balance
   Annual fee
   Annual percentage rate (APR)
   Average daily balance
    CREDIT TERMINOLOGY

   Finance charge
   Grace period
   Other fees
    –   Late
    –   Over limit
    –   Cash advance
ESTABLISHING CREDIT

           Open checking and/or savings
            account
           Deposit amount of money in
            financial institution
            –   Borrow against it with savings as
                collateral
           Borrow reasonable amount of
            money
           Make monthly payments
           Pay bills on time
COST OF CREDIT
       Effects of minimum payment
              Borrow $1000 @ 22%
                – Minimum payment $20
                – Interest $18.33
                – $1.67 goes to pay off debt
                      Total Repayment – $11,80.00

              Borrow $5000 @ 15.9%
                – Minimum payment approx. $110
                – 343 payments
                – $7,129.01 interest
                – Total repayment - $12,129.01
National Credit Repository
  Equifax – www.equifax.com
  Experian – www.experian.com
  TransUnion – www.transunion.com
  Fair Isaac Credit Score Hotline 800-777-
   2066
  Everyone is entitled to one free report a
   year.
DEBT TO INCOME SAMPLE

   Sample
      Someone with gross monthly income
       $2,000 making minimum payments of
       $400 on debt (loans and credit cards)
         debt to income ratio of 20%
          ($400 / $2000 = .20)
DEBT TO INCOME STATUS

   20% or less:
       In great standing
       Eligible for low interest rate cards
   25% to 30%:
     No trouble getting loans
   30% warning – too much debt
        Reduce debt levels

            affects house purchases, interest rates,
             car purchases
DEBT TO INCOME STATUS

          Over 35%:
              Stop charging
              Cut up your cards
              Develop plan to get out of
               debt
WHAT WOULD YOU DO?
         Lose your job
         Income reduced
         Become ill, widowed,
          divorced
         If debts go to collection
          agency
            –   Communicate with your
                lenders (make arrangements)
OPTING OUT

   To stop receiving pre-approved credit card
    offers
   Opt-out
     1-888-5-OPT-OUT
CONSEQUENCES OF
BANKRUPTCY

            On credit report 10 years
            Difficult to obtain credit
            May not be hired
            Pay higher interest rates
            Destroys credit scores
            May be viewed by others

				
DOCUMENT INFO