Are you a small business owner seeking a loan from Main Street Launch, but have some questions about the process?
Featured here is loan readiness advice from three experts:
- Karla De Leon, Senior Vice President – San Francisco Market Manager
- Adrian Gomez Zavala, Vice President – Relationship Manager
- Joshua Marquez, Program Manager – Veteran Launch
What are two to three things that a client should have before they apply for a business loan?
At the end of the day, we lend to the business and invest in the entrepreneur.
Our specific requirements may vary, but generally we initially look for a solid business plan, financial projections, and location (if the business is a brick and mortar). Ideally, the client is already working on the following items to prepare their business for debt-financing:
- Product-to-market fit: Is this a viable business with potential or existing customers?
We also want to know if the entrepreneurs has relevant experience in their industry, and we need to make sure the business type is SBA-approved (learn more about SBA requirements here).
- Projected financials: How much money is coming in and how much is going out?
We want to make sure this loan is affordable to the borrower, so we look at other forms of repayment (do you have another source of income, etc).
We also want to see how much skin in the game the borrower has. How much have you invested or are you prepared to invest in this business (this is known as equity injection or a down payment).
- Where is the business located?
Is this business location-sensitive, like a restaurant? Is this business a consulting firm that can visit their clients?
If the business operates as a brick and mortar, are they on good terms with their landlord? Most of our loans require your lease term matches the loan term (ie if you have a 5 year loan term, we require at least a 5 year lease).
We want to learn about you and your business to determine what loan products or other resources are the best fit to help you achieve your business goals.
- We need to make sure you have an established business entity (is your business an LLC, corporation, sole proprietorship, etc?).
Each entity type has tax benefits and stipulations. Organizations like Start Small, Think Big can provide advice on what type of business entity to choose.
- We need to know about the owners.
What percentage ownership does each owner have? What are they each contributing to the business? We find many people don’t have this established when they first come to us.
- What is your overall budget, and how much do you need to borrow?
What are you trying to accomplish with this money, and how much is it going to take to accomplish what you want to accomplish? How much do you have to contribute (as Josh mentioned, what’s your equity injection or down payment)? “How much can I get?” is not the right question to start with.
Clarity about your financial history and your businesses financial history helps us figure out the best resources for you and your business. I ask inquiring business owners:
- What do you need the money for?
Borrowers should know how they will utilize the loan funds. This goes hand-in-hand with Karla’s last recommendation.
- Can you show me your most recent business financials?
Borrowers must have their business financials ready (balance sheet and profit & loss statement). If you need help preparing those, we can connect with you a partner who can help you get started.
- How is your credit history?
Credit score is not the most important criteria for us, but a borrower should know their credit report history and be able to explain any items reflected in the report.