How To Get An SBA Loan for Your Company

Entrepreneur’s Organization is a global network of over 13,000 business owners. Learn how EO New Jersey helps over 100 business owners grow.

It’s been a challenging year for small businesses. The need for extra cash may be more pressing than before as many businesses dig their way out of the COVID-19 economic crisis. Many companies, regardless of size, use borrowed capital to fuel growth and fund other initiatives. Long-term, low-interest financing makes SBA loans some of the most affordable business loans on the market, and the process of getting an SBA loan can be lengthy and involved (but worth it). Follow these steps to make the process more manageable:

1. Determine your eligibility for an SBA loan.

First and foremost, make sure you’re eligible for an SBA loan. Depending on the program you choose, there are specific guidelines, and some are more flexible than others; however, the general requirements include that your business:

  • Be a registered for-profit business
  • Be located and operating in the U.S.
  • Meet the SBA definition of a small business
  • Has an owner that has invested time and money into the business
  • Has no past delinquencies or defaults on government debts

2. Choose your SBA loan program.

The next step in getting an SBA loan is choosing your specific loan program. The SBA offers various loan programs, and each program has unique requirements, terms, loan amounts, typical interest rates, purposes, etc. It’s important to consider all of the options and determine which SBA loan program is best for your business. A few of the most popular options include:

SBA 7 (a) Loans

A few different SBA 7 (a) loans offered by SBA lending partners (typically banks) are available, with loan amounts up to five million dollars. The terms can be as long as 25 years, with interest rates ranging from eight to thirteen percent, and can be used for any business purpose.

SBA 504/CDC Loans

Sometimes referred to as SBA real estate loans, SBA 504/CDC loans are used exclusively for major fixed asset purchases, such as large equipment or real estate purchases. The distinctive structure—a participating Certified Development Company (CDC) in your area provides 40 percent of the loan amount, an SBA lender provides 50 percent, and you offer the remaining 10 percent. The loans can extend up to five and a half million, with interest rates falling between five to six percent and terms up to 25 years.

SBA Microloans

The SBA Microloan program is designed to offer small businesses affordable capital in smaller amounts—with a maximum loan amount of $50,000. The maximum term available is six years, with interest rates falling between eight and thirteen percent. Because the eligibility criteria for this program is more flexible, it can be an excellent option for start-up businesses.

3. Find the right SBA lender.

The right SBA lender for you will largely depend on the loan program you’ve chosen. Check with your local bank or the bank you use for your business and ask them what kind of SBA loans they offer. You can also connect to an SBA lender using the SBA’s website.

4. Gather the information and documentation needed to apply.

The SBA loan application requires significant information and documentation—some of which will depend on your lender and loan program. Overall, make sure that you gather the following information and documents for your SBA loan application:

  • Basic business information
  • Basic personal and background information for you, as well as any other business owners
  • Loan request letter detailing the amount you’re asking for and how you plan to use the funds
  • Business plan
  • Personal and business tax returns
  • Personal and business financial statements—including a balance sheet, profit and loss statement, bank statements, and cash flow statement for the business
  • Existing business debt schedule, if applicable
  • Legal documents like business licenses, leases, and contracts
  • Any SBA loan requirements that are unique to your program

5. Complete your application.

Once you’ve gathered all of the information and documentation you need, the next step to getting an SBA loan is completing the application. The specific document will depend on the lender. Some lenders may offer online-based applications, whereas others will require that you complete a paper form.

6. Close your loan and receive funds.

Congratulations! The final step is working with your SBA lender to close the loan.

These are the basic steps to getting an SBA loan. Although the process may not be particularly fast or simple, the time and effort necessary to get an SBA loan are well worth it.

The EO global entrepreneurial network offers a suite of connections, tools, and resources to help you succeed in your entrepreneurial journey. Explore the forums, events, mentoring, and coaching benefits EO members receive to enhance your business.

Entrepreneur’s Organization is a global network of over 13,000 business owners. Learn how EO New Jersey helps over 100 business owners grow.

This post was originally published on the EO Global Octane Blog.

Online Tools for Better Business

Entrepreneur’s Organization is a global network of over 13,000 business owners. Learn how EO New Jersey helps over 100 business owners grow.

Despite the economic stranglehold impacting the business world, there are a lot of inexpensive online resources that can help you set your business up for success. Here are a few of the best Web sites I’ve come across, and what they have to offer:

99designs.com
The appearance of your business matters, especially when you’re trying to establish yourself in the marketplace. The right designer can be integral to perfecting your corporate image. 99designs takes the risk out of this process by using your business brief to set up a design contest, whereby designers compete to make the best design for your needs. Just know what you want designed and how much you’re prepared to pay for it. You choose your favorite design and pay the agreed fee, and then the designer sends you his completed design and copyright to the original artwork.

Basecamphq.com
This is a project management system that runs online. It’s collaborative, and while it’s mainly recognized by Web developers as a key tool, it serves as a solid project management system for any company. It’s a simple system to use, and it provides file storage, as well as a way of connecting with clients who may not be as good at online communication as you are. This is an excellent, easy-to-adopt project management tool, and it prevents new businesses from having to invest in their own project management system at great cost.

Venda.com
Venda offers technology platform needs and provides ongoing business services and consultation. Its focus is on e-Commerce— they have a team dedicated to finding simple, speedy solutions to e-Commerce problems. After implementation of the technology, there is a support and service infrastructure of more than 200 people who will work with you to boost your return on investment. There is a guaranteed 24/7 help desk, too. What’s more, Venda offers a simple, cost-predictable monthly payment model, so you’re not surprised with hidden costs.

SubHub.com
SubHub makes it easy for anyone to build a moneymaking Web site. It’s turnkey, hosted and managed platform incorporates powerful, yet easy-to-use, content management with a range of income-generating options. These include subscription and membership site functionalities, but also advertising capabilities, affiliate marketing tools and an online store. By making it simple to make money from online content, SubHub gives clients greater freedom and the opportunity to profit from their expertise.

Entrepreneur’s Organization is a global network of over 13,000 business owners. Learn how EO New Jersey helps over 100 business owners grow.

This post was originally published on the EO Global Octane Blog.

What to Ask Before Buying a Franchise

Entrepreneur’s Organization is a global network of over 13,000 business owners. Learn how EO New Jersey helps over 100 business owners grow.

Article by:

Akhil Shahani

EO Bombay

Akhil Shahani is the director of The Shahani Group.

E-mail Akhil at akhil@shahanigroup.com.

If you’re considering buying your own franchise, you probably have a million questions running around in your mind; questions that can make a difference in the success or failure of your business goals. To give you control during the decision making process, here is a checklist of 20 questions that I share with clients before they make the leap into franchising:

  1. How long has the company been in existence before it started franchising? Was it specifically set up to franchise?
  2. What is the company’s financial position? You should check accounts for at least the past three years. Can you get trade or bank references?
  3. Can the franchiser show you any figures or net profits of one or more of its existing franchisees, and can you personally check the figures with the franchisees themselves?
  4. What are the criteria to be selected as a franchisee?
  5. As a franchisee, what are your obligations? Are there any operational restrictions on pricing or use of suppliers?
  6. What is the nature and extent of the rights that will be granted to you?
  7. How many franchised units are currently in operation? Are there also companyowned units in operation?
  8. Does the agreement have a termination clause; if yes, what will it cost you?Can you sell your franchise?
  9. Does the franchiser have a reputation for honesty and fair dealing among its franchisees?
  10. What kind of assistance will the franchiser provide? Will it involve management and employee-training programs, advertising campaigns, credit and merchandising ideas?
  11. Does your region have a law regulating the sale of franchises, and has the franchiser complied with that law?
  12. How much equity capital will you need upfront to purchase the franchise and operate it until the profits start rolling in? Will there be sufficient profit left once you’ve paid all of your expenses?
  13. What are the initial and ongoing fees? Are there any other hidden costs?
  14. Will you get the exclusive rights to the territory for the length of the franchise period, or can the franchiser sell a second franchise in your territory? If the answer to this question is “yes,” what is your protection against the second franchising company?
  15. Have any franchised units failed during the past 12 months? If so, what were the reasons?
  16. Is the franchiser a member of a reputable franchise association? Have they ever been refused membership?
  17. In the event of a dispute between the franchiser and the franchisee, how will it be dealt with?
  18. What is the procedure for terminating the agreement, and what are the consequences of doing so?
  19. How is the communication between the franchiser and franchisees? Is it possible to talk freely to existing franchisees?
  20. What are the franchiser’s long-term plans for the future of the business?

Though business surveys show that fewer than 20 percent of all franchised businesses fail compared to the 60-80 percent failure rate for all new businesses started each year, it’s important that you investigate a franchise opportunity thoroughly. The checklist above will serve as the starting point nof your franchising journey. If you can get the answers to each of these questions, and those answers satisfy you, then you’re on your way to becoming a proud franchise owner.

Entrepreneur’s Organization is a global network of over 13,000 business owners. Learn how EO New Jersey helps over 100 business owners grow.

This post was originally published on the EO Global Octane Blog.

Buying a Business? Start Here.

Entrepreneur’s Organization is a global network of over 13,000 business owners. Learn how EO New Jersey helps over 100 business owners grow.

Buying an established business has its advantages. For example, when you buy a business, you take over an organization that’s typically already generating revenues. There’s also usually a customer base, an established business reputation and existing operational procedures. However, just like any kind of investment, there are risks as well. It is important to do the necessary research and understand the factors that may affect the success or failure of your venture.

We explore three of the most important things to consider before buying an existing business.

1. Is the Business Right for You?

Buying a business that’s not right for your needs and interests may cost you more time, energy and money than you think. To prevent this, gather all the necessary information about the business to help you determine if you can commit to it.

Start by reflecting on your intention of buying the business. Do you plan to get involved actively and manage the business yourself or is this a passive investment? Be honest and clear in your intentions as you assess potential businesses and employees.

Second, you must understand how the organization operates—and be interested in those operations. This doesn’t mean you need to be passionate about the product or industry. Rather, it should at least be something that holds your attention, you have experience with and you would be happy to devote your time and energy.

2. Is the Business a Good Investment?

Once you have established that the business is right for you, the next thing to consider is whether you can make money from the business. While it may seem obvious, confirming profitability requires you dig thoroughly and find detailed answers.

Find out the reasons why the business is for sale. If the business is in bad shape and hasn’t been performing well financially, then ask yourself, “Am I ready and qualified to take on this considerable project?”

It is best to determine the business’s average gross annual revenue and net profits (if any) for the previous two years. If it meets your financial expectations, the next thing you’ll want to do is determine its fair market value.

Make sure you determine the right value of the business using several factors, including the average revenue, expenses, assets, liabilities and future projected earnings. You may also need to consider its market share and clientele, as this can affect future earnings. Through this information, you will likely be able to evaluate the time you need to invest as well as the value of your potential ROI.

Further, check out the business’s reputation. Do they have an established customer base and market share? Are the employees experienced and trustworthy? Are the products and services of good quality and value? How well known is the business in the market? These questions will help you determine whether or not the business is worth buying.

3. Can You Afford the Purchase?

You have established that the business is interesting, valuable and has a potential to become a good investment. The next thing? Find out whether you have the funds to purchase the business outright or if you need to finance the purchase, including being able to cover other operating expenses/unforeseen costs associated with the business.

Aside from exhausting your savings and borrowing money from friends or family, you have the option to take a loan for buying a business. A few of the financing options include SBA loans, ROBS , conventional bank loans and HELOCs. Some of these require a 10 percent to 30 percent down payment, collateral and a credit score of ideally 600 or more.

Further, you have to consider other things when trying to buy a business. Are you going to pay yourself a salary for managing the business? Is it a failing business you need to turn around and invest more cash into over time? Or is it just a passive cash flow investment where you do nothing and expect to receive a return?

Being able to afford a business isn’t just about the initial financing. Consider the expected cash flow and financial demands over time. After all, there might be unforeseen and costly strings attached to buying and owning a business.

Bottom Line

Buying an existing business that’s in line with your interest and has a potential for further growth is a good investment. However, there are strings attached. Other than putting up your own money and securing financing to help you with the purchase and other expenses, you also need to ensure that you’re making the right decision based on your needs.

This post was originally published on the EO Global Octane Blog.

What to do When Generations Clash

Entrepreneur’s Organization is a global network of over 13,000 business owners. Learn how EO New Jersey helps over 100 business owners grow.

 

Article by:
Jonathan Davis
EO Austin

 

I’ve just returned from the EO President’s Meeting in Dallas, Texas, USA, where one of the biggest topics was the significance of delivering value to members in order to ensure retention. Like most organizations and companies, acquiring a new member (or customer) is very expensive and time-consuming. It seems obvious that, once you’ve acquired them, retaining members should be a heavy area of focus for any leadership team.

The discussion eventually shifted to the age of our members and the risks/rewards of eliminating the ceiling that is currently placed on new members. When EO was started more than 20 years ago, it was created for entrepreneurs who were under the age of 40. When I joined five years ago, the average age of a member was about 37. Today, the average age of a member is 41. To put it more simply : Every year that I’ve been part of this organization, the average age has gone up by one year, and a new generation of entrepreneurs are ushered in. This is indicative of our entire population, and the management of these people is a major challenge for companies everywhere. As businesses continue to grow and mature, entrepreneurs are worried about the retention of their employees, as well as the age of their teams.

Author Jason Dorsey, widely known by the business word as the “GenY Guy,” has some incredible data points regarding generational employees. Here are a few:

  • For the first time ever, the world has four generations working together in the same workplace (GenY, GenX, Baby Boomers and “the Mature” Generation)
  • The average life expectancy of a Baby Boomer is about 78, while the “retirement age” is still 65
  • GenY employees are the first generation in history that will likely need to work for 65 years (that’s retirement at 87-90 years old)

On top of these points, here are several scary ones for business leaders:

  • While Baby Boomers are finally comfortable with e-mail and are actively learning about Facebook, GenY’ers aren’t using those mediums as much because they’re cumbersome and/or they’re no longer “cool.”
  • GenY’ers believe that long-term tenure in a role is 13 months. Meanwhile, Baby Boomers want to give these employees reviews once a year.
  • GenY’ers aren’t really motivated by money as a “carrot” the way previous generations have been. Why? Because their parents (those same Boomers) have given them a credit card to pay for things like gas, groceries, vacations, etc.

Driving retention, loyalty and performance from the GenY population is becoming a real challenge for businesses. This is a generation that is affordable, hard-working and passionate about their work, but they can’t be relied on to work diligently from 8 a.m. to 6 p.m. every day. They aren’t interested in sitting in meetings to talk about the next meeting, and they’re no longer “tech savvy.” Rather, Jason calls them “tech dependent,” because they don’t have any idea how their smart phone works— they just know they can’t live without it.

What are you supposed to do as a business leader when you wake up and realize that the future of your organization depends on leveraging this new population of workers; these people that you can’t relate to? Here are a few suggestions Jason offers:

  • Accept that while work/life balance is something that Baby Boomers dream about and GenX’ers talk about, GenY lives it. You won’t be able to keep them around if you expect them to sacrifice their friendships and social time. Create a workplace that inspires them and encourages both hard work in short spurts and downtime.
  • Let GenY’ers work in teams as often as possible. This is a generation that was raised playing soccer, baseball and other team sports. If you’re asking them to work solo and independently without praise, they’re not going to stay engaged.
  • Start with the outcome and then work backwards to talk about the steps. This is counter-intuitive to the way most people are used to teaching, but by starting with the big picture and driving universal awareness of the challenges, GenY’ers will embrace the challenge and buy in to the goals instead of zoning out.
  • Give employee reviews all the time— 10-minute check-ins every week or two are significantly more powerful than an annual review. Let this new generation know what they are doing right, give them praise, offer corrective actions and make minor adjustments all the time instead of hoping they’ll be around for their first annual review.

These and other tips are in Jason Dorsey’s new book, Y-Size Your Business: How Gen Y Employees Can Save You Money and Grow Your Business, which I recommend to all of my EO peers. Jason offers invaluable insights into how to handle new generations of employees, and he’s taught me a lot about how to set my business up for future success. As an entrepreneur, this is one book I can count on.

Source: EO Global Octane Blog