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Teach Me About Small Business Loans
Jacobkosh
Gamble a stamp.I can show you how to be a real man!Moderator mod
Gamble a stamp.I can show you how to be a real man!Moderator mod
A friend of mine recently approached me about the idea of starting a business - specifically, a hobby and game store - in midtown Kansas City. It's an idea we've batted around before, and he's recently come into a bit of money but also wants to look into the idea of securing a small business loan.
The operation and so forth is covered. We've got plenty of practical experience between the two of us and a large network of professional contacts; we even have some people we can talk to in the city about tax financing. The issue right now is just the how-to of getting capital to get started. Neither of us has ever done it before.
I know it's a big topic, and I'm not looking for anything close to a comprehensive answer, but if any of you have a good idea even of some places to begin looking - book titles or websites or anything - I'm all ears.
The operation and so forth is covered. We've got plenty of practical experience between the two of us and a large network of professional contacts; we even have some people we can talk to in the city about tax financing. The issue right now is just the how-to of getting capital to get started. Neither of us has ever done it before.
I know it's a big topic, and I'm not looking for anything close to a comprehensive answer, but if any of you have a good idea even of some places to begin looking - book titles or websites or anything - I'm all ears.
Jacobkosh on
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You also need a tax id from the federal goverment. Get that second, it's free and can do it online IIRC.
After that, get a cheap/free business credit card and bank (checking/savings) accounts. Don't do anything stupid with them. They help build some small credit. It won't change your credit risk by a lot, but every little bit helps to start.
Also, NEVER pay anything out of your personal account. The IRS hates that. Your accountant will hate that. If you pay it from your business accounts you can count it as a "lose". If you pay it from your personal account, you can claim it without pissing off the IRS.
Then, you'll first need a business plan.
These guys can help: http://www.sba.gov/
You just go to any number of their "classes", it takes about an hour or two.
They give you some advice.
Generally, the "standard" software for writing business plans is Business Plan Pro.
http://www.bplans.com/
You can write it in word, but that software makes it a lot easier (and does handholding). It's a pain in the ass (at least for me) to write a business plan. Some people like it, but I hated it. Software made it a bit more tolerable.
If you want to get it for cheap, you can goto the SBA office (see above). They have computers with it pre-installed and you can use it for free. But they don't let you take in or out files (due to security and copyright reasons). You have to leave that stuff there.
The SBA office can also help you if you get stuck on your business plan. They are really helpful and almost all their services are free.
After you have a business plan, you goto a couple banks and apply for a Small Business Loan (the goverment helps "off set" some of the banks risk if you default). Generally they like to see you fronting some of the startup cost. If you go in there and ask for $250K but aren't willing to put up even $25K it's doubtful they will help you out.
You also must show how and when you are going to be making a profit in your business plan. They are bankers, they like to see numbers and dates. They like to see supporting data.
You can also hit up capital investors for cash. Some times they are a good deal, sometimes not.
Thinking of things like looking into what competition is around if any, how will you compete with them. The demographics that shop in that area; how much they spend on hobbies and games, is the area predicted to change in the future, like new homes, more foreclosures, aging/younger population? Probably more.
Rhino, is that part backwards?
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I'm pretty sure it's a typo - should read "If you pay it from your personal account, you cannot claim it without pissing off the IRS". Furthermore, never pay personal expenses out of a business account either.
If you keep your business and personal accounts duly separated they can't do that.
Yea, sorry. That was a type-o.
Always pay from your business accounts. NEVER pay from personal accounts.