Ineligible Applicants | Business Plan Outline | Sources of Seed Money
Appendix of Loan Programs | Seven Steps to SBA Loans | Balance Sheet

NOTE:
This information sheet covers only the basics. Circumstances may vary per individual. Please make a free-of-charge appointment to discuss your particular needs.

If you are contemplating applying for a commercial loan, your key to successfully obtaining financing for your small business is a solid business plan. You must know who you are, where you've been, and where you're headed. In addition, you must know who your market is (and it's NOT everyone), your competition, and what you can provide that they're not. In other words, you must fill a need ("nitch") that isn't being met; otherwise, you'll just be adding another competitor to the marketplace. This will result in reducing the consumer base ratio, no one in the industry will be profitable, and you will, most likely, suffer the consequences first.

The following are financing basics:

1. BUSINESS PLAN: Prepare a convincing business plan. It will require considerable research, but you will need the information you obtain to be successful in your business anyway. The lender must be convinced you know what you're doing and have given your business considerable thought. In addition to the outline included in this document, a comprehensive, fill-in-the-blanks-style business plan workbook is available for $25 at the SBDC. The RCC SBDC also has books on the topic in the small business library and informative videos regarding financing and business plan preparation, which you may view in their offices at no charge. The SBDC also has an SBA computer program, "First Step Review", available at no charge for use in the computer lab, that may help a potential applicant determine his or her chances of successfully obtaining a small business loan.

2. Any financing will require personal financial data. You will need to list your assets and collateral. There is no such thing as "100% financing."

3. SBA GUARANTEED LOAN PROGRAM: Small Business Administration (SBA) financing may be available to you if you are unable to obtain reasonable financing (for instance, the terms of the loan are not advantageous to your needs), if your assets and collateral are a little weak, or if the bank wants a little extra guarantee, especially if you are just starting business. You may also use SBA financing if yours is a seasonal business and you require a payment structure that reflects this seasonal nature. Through SBA financing you may delay payments for a couple of months to enable you to get your business up and rolling.

You must first present your business plan to a local commercial bank (a listing of such institutions is included in this document.) The bank will decide if they wish to process your application through the SBA. The majority of SBA financing involvement is in the form of a guarantee loan. If the bank likes your proposal, but you just don't fit into their guidelines for making loans, the SBA's parameters are a little broader. You may then be able to obtain the financing you seek by the SBA acting as a co-signer on the bank loan. (see appendix for listing of current SBA loan programs.)

4. SBA guarantee loan interest rates will be basically the same as a loan without the SBA. The benefit is "if you are unable to obtain reasonable financing" you may ask about a guarantee loan. This may benefit you if the bank is willing to loan you the capital you need, but you desire a longer repayment.

5. SBA DIRECT FUNDING: The SBA has indicated that the only direct funding available is for handicapped individuals, who are unable to compete in the marketplace because of their handicap. For such qualified individuals is limited direct loan funding available from the SBA. You must, however, a) apply for a financing from a local commercial bank. b) If this fails, request a guarantee loan. If you still are unable to obtain the necessary financing, c) you may apply directly to the SBA. However, steps 1 and 2 still apply.

6. CAPITAL ACCESS PROGRAM is designed to increase the availability of loans to small business in Oregon from the local bank. Through this program the Oregon Economic Development Department makes provisions for a form of loan portfolio insurance so lenders may make business loans that carry higher than conventional risks, but that are within the soundness and safety requirements of federal and state banking regulations. More than 70% of the loan amounts covered by the program's insurance have been for less than $30,000. The typical loan averages $31,000. More than one-third of the loans are for startups. Businesses benefiting from the Capital Access Program can be found in almost all industry categories, including services, retail, manufacturing, construction, wholesale, forestry, finance, lodging and others. Rogue Valley participating banks include: Bank of America, Key Bank of Oregon, and U.S. Bank.

7. THE ENTREPRENEURIAL LOAN FUND is available through the Oregon Economic Development Department and Lottery funds to those who have been in business less than 15 months. In order to apply for this type of funding applicants must work closely with their local SBDC to develop their business and business plan as well as attend any recommended training. The borrower is required to provide a minimum of 20% cash, property or other business equity. The program fills a unique financing gap, otherwise unavailable to small and start-up companies.

8. SOREDI REVOLVING LOAN FUND: A recently established revolving loan fund to help ease the economic transition precipitated by the Northwest timber crunch. Focus is on providing expansion and start-up funds to locally owned small to medium sized manufacturing and industrial companies, with the intent of creating new jobs. The loan money is specifically designated for construction, equipment and working capital. Ineligible firms are those engaged in agricultural projects, lodging, and entertainment industries. SOREDI is the recipient of a Rural Economic Development grant to help qualified individuals, who do not qualify for many standard financing programs, obtain funding. For further information, contact Southern Oregon Regional Economic Development, Inc., (503) 773-8946.

9. OREGON BUSINESSES DEVELOPMENT FUND: Economic Development financing may be available to you for capital equipment and fixed assets if you are a manufacturing firm who will be able to hire additional employees by expanding your present operation. This type of financing is low interest. Program guidelines include: the maximum loan is 40% of eligible project costs, a private lender is required for a portion of the project, refinance of existing debt is generally ineligible, individual OBDF loans may not exceed $250,000 per project, the fund gives preference to projects which will create a minimum of one job per every $15,000 of OBDF investment. Money is set aside for loans of $50,000 or less, loans to emerging small enterprise in economically depressed areas, loans in severely affected communities, and loans in rural areas of the state. OBDF may not supplant other sources of economic development financing, but is designed to complete a financing package where equity and bank financing have been maximized. Relocation of a firm from one labor market to another is generally ineligible. Collateral and security: loans may be subordinate to other project financing, loans must be fully secured (may be relaxed in distressed areas), additional security may be required (e.g., life insurance, personal guarantees and off-project assets.) In most cases, an equity injection of at least 10% will be required. Startups will usually require at least 30% equity.

10. OREGON CREDIT ENHANCEMENT FUND: Provides guarantees to banks to increase capital availability to small firms. The program is designed to increase inventory and other asset-based lending. The Oregon Economic Development Department can guarantee loans with terms up to 15 years for working capital, equipment and real estate transactions. Businesses eligible for Credit Enhancement Fund guarantees include manufacturers, processors, natural resource industries, distribution and new technology businesses. Retail businesses are not eligible. Banks originate and service the loans. Rogue Valley banks willing to consider this type of funding are First Interstate Bank of Oregon and Key Bank.

11. RURAL ECONOMIC DEVELOPMENT GUARANTEE PROGRAM: (Formerly The Farmers Home Administration) This program guarantees loans to further business and industrial development. Business and industrial guaranteed loans may be made in any area outside the boundary of a city of 50,000 or more and its immediate adjacent urbanized area with population density of no more than 100 persons per square mile. Priority is given to applications for projects in open country, rural communities, and towns of 25,000 and smaller. Assistance is provided in the form of a loan guarantee through the local lender. Priority is given to projects in areas of high unemployment, to projects which show a low amount of investment per job created or saved, and to projects that will employ members of displaced farm families. Loans are limited to a maximum of $10 million. For further information contact the Rural Economic Development Department (503) 414-3360.

12. SOUTHERN OREGON WOMEN'S ACCESS TO CREDIT (SOWAC): Gaining access to credit is one of the major problems facing the woman entrepreneur. Many women, lacking assets or co-signers, cannot qualify for conventional loans through established financial institutions. This program includes a training program, mentoring, and start-up capital. Call(541) 779-3992.

The following banks, or any of their branches, are listed as being willing to finance commercial endeavors and are open to SBA financing, if necessary. The bank will prefer that you first prepare your business plan prior to requesting financing. To discuss your proposal with the banker, it is recommended you first make an appointment with the bank's commercial loan officer to ensure they have time set aside for you. The following listing does not constitute an endorsement of any particular bank:

Bank of America* 735 SE 6th Street Grants Pass 97526 474-3300	Wells Fargo Bank 205 NE 6th Street Grants Pass 97526 474-6581
Key Bank 150 NE E Street Grants Pass 97526 479-2633	U.S. National Bank 400 SW 6th Street Grants Pass 97526 474-6159
Community Bank 1304 NW 6th Street Grants Pass, OR 97526 474-7278	People's Bank of Commerce 750 Biddle Road Medford, OR 97504 776-5350
Home Valley Bank 598 NE "F" Street Grants Pass 97526 476-4663	Western Bank 151 Midland Avenue Grants Pass 97526 479-3802
**Valley of the Rogue Bank 100 NE Midland Avenue Grants Pass, OR 97526 Jerry Burns 476-1401	Washington Mutual 151 NE Midland Grants Pass 97526 479-3802

* Bank of America has indicated they have a special loan program for women and minorities who have been in their own business for three years. Call your local branch to find out more.

** Valley of the Rogue Bank has an accounts receivable financing program, The Business Manager , which provides a larger availability of money than a credit line and is more personal than traditional factoring. In addition, accounts receivable insurance is available through the program. Accounts receivables must be at least $15,000 to qualify and can be used with other financing options. Contact the Valley of the Rogue Bank nearest you for further information.

Liberty Federal Bank, 1000 Biddle Road, Medford 97504 (503) 779-1141 indicates that they are interested in financing real estate investment properties

INELIGIBLE APPLICANTS FOR SBA LOANS

The following are ineligible for SBA guarantee or direct loan funding:

BUSINESS PLAN OUTLINE

The following is a general outline of items included in a business plan. More detailed information is available at the RCC SBDC business library or is for sale at the SBDC.

The narrative portion of your plan supplements and explains the above information. If there is anything unfavorable in your credit history, explain it away before the bank uncovers something that may cause them to deny your request. Don't give the bank any surprises! Remember, your personal credit and financial status will be intertwined with that of your business.

SOURCES OF SEED MONEY - ALTERNATIVES

Before considering a commercial loan and incurring additional debt, look for alternatives, such as:

APPENDIX OF LOAN PROGRAMS
SMALL BUSINESS ADMINISTRATION (SBA)

(a) Loan Guaranty Program: For Small Businesses. Delivered through commercial ending institutions. This

section authorizes the SBA to guarantee--and under very limited circumstances, make--loans to small businesses, where the necessary financing is unavailable on reasonable terms through normal lending channels. The SBA basic guaranty program is generally used to fund the varied long-term needs of small businesses. The program is designed to promote small business formation and growth by guaranteeing long-term loans to qualified firms. Loans are available for many business purposes, such as real estate, expansion, equipment purchases, working capital or inventory. SBA can guarantee up to $750,000--generally between 70% and 90% of the loan value--at an interest rate not to exceed 2.75 over the prime lending rate. Maturities are up to 10 years for working capital and up to 25 years for fixed assets.

(b) Low Documentation Loan Program (LowDoc):

For Small Businesses. Delivered through commercial lending institutions. The purpose of this program is to reduce the paperwork prepared by the bank involved in loan requests of $100,000 or less. Under LowDoc the SBA relies on the strength of the individual applicant's character and credit history.

(c) CapLines (formerly GreenLine) Program: For Small Businesses. Delivered through commercial lending

institutions. The CapLine is intended to finance the short-term cyclical working-capital needs of small businesses. Loan advances will usually be made against a borrower's certified level of inventory and accounts receivable. Generally, the SBA regulations governing the 7(a) guaranteed loan program also govern this program. Under CapLines, SBA generally can guarantee up to $750,000.

(d) Women's Prequalification Loan Program: For women-owned small businesses. Delivered through commercial lending institutions, with the assistance of, such as small business development centers. Provides women business owners a preauthorized loan guaranty commitment. It also streamlines the application process and provides a quick response to loan requests of $250,000 or less. A $750 packaging fee is payable in advance by the applicant when the business plan and financial statements are submitted for packaging. Successful loan applicants will have the $750 fee plus an additional $250 fee rolled into the loan proposal for a total of a $1000 packaging fee.

(e) Secondary Market: Lenders who hold business loans guaranteed by the SBA may improve profitability and liquidity by selling the guaranteed portions of those loans in the secondary market. Banks, savings and loan companies, credit unions, pension funds, and insurance companies are frequent buyers.

(f) Handicapped Assistance Loan: For nonprofit organizations and applicants with disabilities. This is an SBA direct loan program. This program assists individuals with disabilities and public or private nonprofit organizations for the employment of the handicapped. Financing is available for starting, acquiring or operating a small business. There are two programs of assistance: HAL-1 and HAL-2. Under HAL-1, financial assistance is available to state and federal-chartered organizations that operate in the interest of disabled individuals. Under HAL-2, financial assistance is provided to handicapped individuals who must provide evidence that their business is a for-profit operation, qualifies as a small business, is 100% owned by one or more handicapped individuals, and the handicapped owner(s) must actively participate in managing the business.

8(a) Participant Loan Program: For 8(a) participant firms/minority advocacy groups. This is an SBA direct loan program. Makes financial assistance available to 8(a) certified firms. The loans can be made directly or through lending institutions under the agency's immediate participation or guaranty programs. Applicants must be participants in the 8(a) program and eligible for contractual assistance. Loans may be used for facilities and equipment or working capital.

502 Local Development Company Program: Delivered through certified development companies through commercial lending institutions. Provides long-term, fixed-asset financing to rural areas.

504 Certified Development Company Program: Delivered through certified development companies. Provides long-term, fixed-asset financing. Typically, proceeds are provided as follows: 50% by an unguaranteed bank loan, 40% by an SBA guaranteed debenture, 10% by the small business customer. The maximum SBA debenture is $1 million.

Small Business Investment (SBIC) Program: Delivered through SBICs.: SBA licenses private venture-capital firms, small business investment companies (SBICs) and supplements their capital with U.S. government-guaranteed debt or participating securities. SBICs make equity investments and long-term loans to small businesses. For further information contact the Portland District SBA office: (503) 326-2682.

Specialized Small Business Investment Company (SSBIC) Program: For socially and economically disadvantaged small business. Delivered through SSBICs. SSBICs operate the same as SBICs, but are entitled to additional government leverage in return for agreeing to invest in, or loan to, small businesses owned by people who are socially or economically disadvantaged. For further information contact the Portland District SBA office: (503) 326-2682.

Surety Bond Programs: For small construction and service contractors, surety and insurance companies, their agents, federal and state agencies, state insurance departments, federal, state and other procurement officials. Delivered through insurance companies and their agents. Some agents are Preferred Surety Bond providers and do not have to submit their package to the SBA for review. SBA does not provide bonds directly to contractors. Contractors must apply through a surety bonding agent. SBA's guarantee goes to the surety company--not the small business contractor. Field offices maintain a list of agents and sureties. By law, prime contractors are required to post a surety bond on federal construction projects valued at $25,000 or more. Many states, counties and municipalities and private sector projects and subcontracts also require surety bonds.

SEVEN STEPS TO SBA LOANS

Every loan requires certain basic elements, documentation, a plan, etc. The following seven steps are important to businesses seeking an SBA or any small business loan:

1) Develop a plan, a business plan that is. This is especially necessary for start up and small businesses on the threshold of expansion. Any lender will need to see a business plan. It not only outlines business strategies, planning and forecasting, but it is also an exercise to help the borrower focus on where business is headed. It forces business owners to crystallize opportunities and challenges and make plans to meet objectives and provide for possible contingencies.

2) Determine how much you need and document how it will be spent. You may have a ball park figure in mind, but you'll need to provide a lender with an amount derived from solid data. Lenders want to see a well prepared itemization of how the loan's proceeds will be used. An SBA loan can cover commercial real estate acquisitions, equipment acquisitions, working capital, inventory, even debt consolidation (if not in arrears.)

3) Compile a three year compendium of tax returns. Your lender will want to see both personal and business tax returns for the past three years. The information on these returns helps the lender verify profitability and cash flow.

4) Update resumes. Possibly the most important factor in a business's success is management experience. Resumes on business principals will help satisfy the lender that the folks in charge have the experience to manage it profitably. This helps build the lender's confidence that the business is here to stay.

5) Prepare a personal financial statement. A personal financial statement speaks to the borrower's need by verifying SBA loan eligibility. An SBA lender must ensure that the borrower has no more than 25% of the requested loan amount in liquid assets such as savings.

6) Compile a business debt schedule. Borrowers will need to show the lender prior obligations and debts and how these effect cash flow. This includes loans and credit lines.

7) Complete the loan application package. Most lenders have a comprehensive loan application which, when completed and compiled with the above six documents, comprises the SBA loan request package. You can receive assistance in completing these forms from the SBDC, but the information must come from you.

BALANCE SHEET SAMPLE
CHECK WITH REPORTING AGENCIES TO DETERMINE YOUR CREDIT RATING

You can write to the following major credit reporting agencies and ask if your credit report shows any history of missed payments, liens, or other problems. The agencies are required to respond to your inquiry within 30 days. Start with the best know credit reporting agency, TRW, which recently adopted a program of providing one free copy of its credit reports per year. The following describes how to apply for a copy of your credit report by each agency:

TRW, PO Box 2350, Chatsworth, CA 91313-2350, 1-800-422-4879: Include your printed name, including middle initial and Jr., II (if applicable) current address, previous addresses during the past five years, your Social Security number and date of birth. Also include a copy of a recent credit card bill, utility bill or driver's license (TRW wants something that verifies your address.) And, of course, sign your letter.

Equifax, PO Box 105873, Atlanta, GA 30348, 1-800-685-1111: Include your full name, your current address, former address, Social Security number, date of birth and day-time and evening phone numbers. Equifax normally charges $8 for a copy of your credit report that can be mailed or faxed. Consumers denied credit get one report at no charge.

Trans Union Corp., PO Box 390, Springfield, PA 19064-0390, 1-800-851-2674: For a free report include a copy of a letter of denial within the past 60 days. Include your full name, spouse's name, current address, addresses for past two years, Social Security number, spouse's Social Security number, date of birth, current employment, telephone number and signature of both spouses. If you have not been denied credit within the last 60 days, send $8 for yourself or $16 for you and your spouse.

CSC Credit Service, PO Box 674402, Houston, TX 77267-4402: It charges $8 for yourself or $16 for you and your spouse, unless you've been denied credit in the past 60 days. Enclose a copy of the letter of denial or name of the company that denied you credit, your full name, current address, previous address the past two years, Social Security number and a copy of your signature. Separate information about your spouse must be submitted.