accion texas financing your business during tough times
TRANSCRIPT
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ACCION Texas
Financing your Business During Tough Times
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ACCION TEXASACCION 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.
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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
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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
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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
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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
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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
GOALS WORKSHEET
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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)
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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.
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Ability to Repay MUST be:
Unquestionable!
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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
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First Salary. . . . . . . . . . . . . . . . . . $_________Spouse’s Salary. . . . . . . . . . . . . . $_________Part-Time Job. . . . . . . . . . . . . . . .$_________Child Support. . . . . . . . . . . . . . . .$_________Other. . . . . . . . . . . . . . . . . . . . . . .$_________
TOTAL NET MONTHLY INCOME $________
NET MONTHLY INCOME
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EVALUATE TOTAL MONTHLY INCOME
Determine take home pay Examine other income sources
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NEEDS VERSUS WANTS
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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
WHAT IS CREDIT?
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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
Underwriting Guidelines for Credit
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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 - $25,000.00550 - $12,000.00500 - $8000.00 under 500
ACCION Texas Credit Score Requirements for Loan Amounts:
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Payment History - 35% Balances Carried 30% Credit History 15% Mix of ACCOUNTS 10% Inquires 10%
What Makes Up a FICO Score
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Know payment amounts and due dates Establish personal pay day Determine set-aside expenses
– Review Bill Paying Plan
DEVELOP BILL PAYING PLAN
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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
HOW TO PAY EXPENSES
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Credit– useful in times of emergency– Sometimes easier and more convenient than cash– Allows you to make major purchases
Car House
CREDIT ADVANTAGES
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CREDIT TERMINOLOGY
Adjusted balance Annual fee Annual percentage rate (APR) Average daily balance
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CREDIT TERMINOLOGY
Finance charge Grace period Other fees
– Late – Over limit– Cash advance
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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
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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
COST OF CREDIT
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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.
National Credit Repository
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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 SAMPLE
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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
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DEBT TO INCOME STATUS
Over 35%: Stop charging Cut up your cards Develop plan to get out of
debt
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Lose your job Income reducedBecome ill, widowed,
divorced If debts go to collection
agency– Communicate with your
lenders (make arrangements)
WHAT WOULD YOU DO?
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OPTING OUT
To stop receiving pre-approved credit card offers
Opt-out
1-888-5-OPT-OUT
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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