how to finance your business 6

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Third party financing sources, such as commercial bank or governmental loan programs, will require a variety of information on the business and borrower.

These include such items as a comprehensive business plan, collateral description, tax returns, projections, and personal financial statements.

There are a number of governmental loan programs available to finance a start-up or expansion.

These loan pools represent federal, state and local funds designed to spur local private investment and aid local development efforts.

Governmental loan programs are not sole source financing options.

They require the involvement of a private lending institution, such as a commercial bank. Governmental loan programs fall into two types; guarantee programs and direct loan programs.

Under loan guarantee programs, all loans are provided to the business owner by a local commercial bank. The governmental program provides to the bank a loan loss guarantee (similar to a co-signor).

The borrower deals primarily with the local commercial bank, which sets the general terms of the loan. The direct loans are either group specific, such as handicapped or veteran loan pools, or are limited in their scope of participation.

This limit is generally set in the range of thirty-three to forty percent of a project's total cost and further requires job creation criteria as part of the loan consideration.

The majority of direct governmental loan programs require the creation of one full-time permanent job for each $10,000 - $20,000 of loan funds sought under that program.

Direct loans also generally have a minimum dollar amount the loan pool will consider, which usually ranges from $50,000 to $100,000. Thus, using the forty percent maximum participation amount; the minimum $50,000 loan amount; and the job creation criteria of one job for each $10,000 borrowed; the minimum project cost would generally be in the $125,000 range with the creation of a minimum of five (5) full-time permanent jobs. For a more detailed discussion of financing and loan programs, please call your local Small Business Development Center office.

Check with your local Chamber of Commerce for a list of grants from the government and from private sources that will help you finance your business.

Lionne Club, March 4 2008, 2:36 PM

Topic: START YOUR OWN BUSINESS I LIONNE CLUB

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