Forums: Discussions for entrepreneurs and small business.

When I go to the next series of lenders, including this organization called SECTOR, the SBA's microloan program, and this other lending institution that works with the SBA to develop the economy, I want to have no less than 5,000 to vest in the company as my equity. I'm going to ask for 15,000. On a side note, I'd like almost the entire loan amount to be used for physical items that can be resold (the best I can do for collateral). I recently used 680.00 for legal and licenses. Can I count this amount as equity? If I had not spent the money on it, I would have after getting the loan. Would it have looked better on paper to have 5,000 and use 680 for the licenses, just to say "I have 5,000", or is it okay to come with, say, 4,500, and tell them I already spent 680 getting licensed? I'm laying off heavy spending till April 7th, so that I can hopefully recoup back to 5,000, but I'm really ignorant of what exactly counts as equity. Is it everything I've spent on the company, or is it just my savings account at the time I go for the loan?

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Making limitless possibilities much more limited.

Matt,

The term "equity" can refer to several things

1. The difference between the appraised value of property and the debt (mortgage/loan) against that property.

2. In a business, the difference between the total assets and total liabilities on the balance sheet is referred to as owners equity.

3. The ownership in a company or the transfer on partial ownership. As in "an equity transaction".

Generally, a lender is interested in the LTV (loan to value) and a "personal commitment of the borrower" (aka skin in the game) so they will be interested in what assets the company owns and the amount of cash you have contributed. Generally, if that cash is from another loan - they might "disregard" it as your contribution.

Using multiple funding strategies and sources can often be the optimum approach- but going after capital on a piecemeal basis can be expensive and may make it more difficult to obtain.

 

If you want to discuss your specific situation, feel free to send me a PM or contact me directly.

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Business Growth Masters, LLC -
Capital Catalysts for Entrepreneurs
Home of the Scalable Business Plan and QuikStart Capital Programs
http://www.bizgrowthmasters.com
info@bizgrowthmasters.com

That works. My contribution so far has been nothing but the fruits of my own hard work. I haven't cashed my 401K check yet, because I have a lot of time I can wait, and the moment I do, it starts getting paid back. 401K loans don't show up on anything a lender would see, or so my coworkers tell me who've had to take theirs for whatever reason before applying for a real loan. I'm optimistic. Thanks Robert, you've always got the right answer.

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Making limitless possibilities much more limited.