Mike Powers

FDIC Memphis

Access to Capital-A Guide for Small Business Start-Ups

• Yourself
• Friends/Relatives
• Working Partner
• Commercial Banks

What Do I Need to Know to Apply for a Loan?

Five “Cs” of Credit:

• Character-Business & personal track record
• Collateral-Assets pledged to secure debt
• Capital-Financial investment in business
• Credit-Past history in repaying debt
• Capacity-Sources of repayment

Typical Credit Proposal

• Description of Product/Service
• Production-Facilities, employees, overhead, gross margins, supply sources, purchasing
• Market-Customers, development & projected growth, pricing, distribution, competition
• Finance-Balance sheet, income statement, cash flow
• Future Projections-Sales, cost of goods sold, net income, cash flow
• Business Advisors-Atorneys, accountants, consultants
• Appendixes-Product/Service brochure, annual reports

How to Find a Suitable Bank

• Establish relationship early
• Open checking/savings account
• Borrow small amount & repay as agreed
• Ask other business owners which banks lend to small businesses in the area
• Arrange meeting with loan officer to introduce yourself and your business prior to needing funds

CRA Perspective

• Not all banks specialize in small business lending
• Small banks do get credit for small business lending but are not required to do so
• Large banks are judged based on its small business and small farm lending
• Borrower should emphasize job creation, especially if town or city has displaced workers
• Borrower should emphasize community revitalization, e.g., increased tax revenues, community growth, impact on other businesses, increased deposits.
• Banks are judged primarily on their lending performance
• Banks must make credit available to all income levels of borrowers
• Banks must make credit available to all geographies within their assessment or market area