accion texas financing your business during tough times

ACCION Texas

Financing your Business During Tough Times

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.

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

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

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

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

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

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)

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.

Ability to Repay MUST be:

Unquestionable!

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

First Salary. . . . . . . . . . . . . . . . . . $_________Spouse’s Salary. . . . . . . . . . . . . . $_________Part-Time Job. . . . . . . . . . . . . . . .$_________Child Support. . . . . . . . . . . . . . . .$_________Other. . . . . . . . . . . . . . . . . . . . . . .$_________

TOTAL NET MONTHLY INCOME $________

NET MONTHLY INCOME

EVALUATE TOTAL MONTHLY INCOME

Determine take home pay Examine other income sources

NEEDS VERSUS WANTS

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?

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

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:

Payment History - 35% Balances Carried 30% Credit History 15% Mix of ACCOUNTS 10% Inquires 10%

What Makes Up a FICO Score

Know payment amounts and due dates Establish personal pay day Determine set-aside expenses

– Review Bill Paying Plan

DEVELOP BILL PAYING PLAN

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

Credit– useful in times of emergency– Sometimes easier and more convenient than cash– Allows you to make major purchases

Car House

CREDIT ADVANTAGES

CREDIT TERMINOLOGY

Adjusted balance Annual fee Annual percentage rate (APR) Average daily balance

CREDIT TERMINOLOGY

Finance charge Grace period Other fees

– Late – Over limit– Cash advance

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

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

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

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

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

DEBT TO INCOME STATUS

Over 35%: Stop charging Cut up your cards Develop plan to get out of

debt

Lose your job Income reducedBecome ill, widowed,

divorced If debts go to collection

agency– Communicate with your

lenders (make arrangements)

WHAT WOULD YOU DO?

OPTING OUT

To stop receiving pre-approved credit card offers

Opt-out

1-888-5-OPT-OUT

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