We all know that getting a business loan from bank with a bad credit is not that easy as it seems. However, you shouldn't get frustrated as there are several private firms which are ready to provide funding to your business.
The business is one that I have been envolved with for over 20 years. I want to open a thrift store, make it work the way is should and repeat the process. I do not need anything fancy, just an open space (5,000 - 8,000 sq ft total). I do not have the budget in front of me, but I think the figure was about $40,000. This includes 1st month rent & triple net and the security deposit (equal to first month`s rent and triple net).
Do you know a way through the maze?
Thanks for taking interest in my plan.
The figure includes the total startup cost. This includes some fixtures (I already own some) some merchandise, 2 registers, pricing guns & materials, signage (outside and in), some advertising, initial truck expense, 6 months insurance for store (required minimum amount), computer setup (I already have a new printer), office supplies, accounting package, licences and hangars. The largest portion of the startup expense is the $12,000 - $20,000 for first month`s rent and security deposit, depending on the location and size. The store I will select will require little or no physical changes. I have three currently spotted and will choose one of them.
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The SBA guarantees a majority of the loan for the SBA lender. This is how banks are able to approve loans on a greater basis (rather than lending outside of the SBA program, where the bank has no guarantee...other than collateral of course if the person should default). This does not, however, mean that the terms are lenient. The credit should be in the area of 660 (fico score, generally speaking), start ups (such as yours, anyone in business for less than 2 years...generally) are required to have capital injection of approx 25% in the bank, and ability to repay the loan is of utmost importance...ie you could do a net directionary income calculation for yourself. Meaning, take your gross monthly income less all taxes and all expenses, does the amount you have left over, cover the monthly loan payment? This is important. The projections are important (but all other requirements must be in place, as discussed above) and you would ideally base this off of industry benchmarks and actuals for like companies (consider region, historical financials available for like companies, etc). What I would do first if I were you is to see if you have a partner who may go into business with you, or better yet, wait until your credit score is improved, and prepare yourself for having the requirements to start (to be able to attain the capital) needed but dont start yet.
As a minority (woman) you do qualify for being able to go through the prequlaification program (go to any SBA or SBDC office in your region), but all this means is that they will look at your loan package first, agree to guarantee loan (if it meets all requirements) and then it is submitted to a SBA lender on this premise (premise being SBA has already agreed to guarantee it)...BUT all this being said, you still need good credit, collateral, capital injection (25% down), ability to repay the loan...if you have all this the process isnt really that complicated. As I mentioned before, a business partner might also be helpful. Without this the chances (at this point, future there is hope if you get prepared :)) are slim to none, as I said at this point. In the future if you prepare it is very possible. It is important to know what you need now so you can get ready, so that you put yourself in a good position to be able to get the capital you need and start your business. Timing and preparing is all. I hope this has helped a bit.
I dont recommend VC, first of all VC`s are interested in this level of investing, and you wouldnt want them to be anyway, as most of your company would be given up in terms of equity and then what is sense of being an entrepreneur. Working on the business plan and having a really great one is a good first step, but you need all the other things in order to raise the funding you need (in terms of loan funding). If you put together great plan, it makes sense, projections with merit (based on what we do know about industry...similar businesses etc) then an angel would be an idea. I would try friends, family as a business partner, a business partner with some collateral or good credit and even trying for a microloan program...if you have good credit some banks will lend up to 15,000 in special programs.
best to you! All is possible, just takes timing, patience, and putting yourself in a good place to be able to receive what you need to make your forthcoming business a success.
Small business loans are the basic loans which are applied for a new business venture. But planning is necessary in case of any forward security.