Fewer Declines, More Approvals

Transcription

1 Fewer Declines, More Approvals Roberto Barragan Principal Aquaria Funding Solutions

2 Small Business and Entrepreneurship 10,000,000 small and micro businesses in United States 75% of all employees Driving force in this recovery Large company layoffs have created new movement to start businesses and seek business management and entrepreneurship training

3 Technical Assistance SBDCs, MBDCs, and WBCs serve 1 million businesses annually across this country Small Business Development Centers Usually college/university based Output oriented Minority Business Development Centers Serving businesses with sales above $500,000 Focused on procurement

4 TA continued Womens Business Centers Non-profit based Outcome oriented Other City funded Business Source Centers, Business Assistance Centers CDBG, WIA, EDA funded Jobs focused

5 TA Continued Types of Technical Assistance Financing and Financial Management Loan Readiness and Packaging Product and Service Development Feasibility Study Business Planning Business Startups Marketing and Sales Assistance Forms of Technical Assistance One on One Counseling Peer to Peer Counseling Workshops Events, i.e. Where s the Money

6 Loan Readiness and Packaging Latino and African American small businesses regularly fail to maintain and produce accurate and timely financial information and tax returns If your lending process is looking for complete loan packages prior to reviewing and assisting borrowers, you will continue to wait and not deploy capital So CHANGE the paradigm! Provide pre loan technical assistance: Jointly prepare projections Provide bookkeeper, accountant, CPA referrals to businesses in need; subsidize costs Pull credit report at intake and instruct applicant how to fix credit issues Pull property profile (collateral) and resolve outstanding liens

7 Small Business Lending Loan Products 1. Micro loans, below $50, Small Business Loans, $50- $500,000 Goldman Sachs 10,000 Small Businesses 3. SBA 7(a): Community Advantage 4. SBA 504

8 Why are loans denied? 1. Credit: Low Credit Score: forget score > look at report 2. Cash flow: Look beyond tax returns to bank statements and more 3. Collateral: Get beyond 1:1, look for repayment assurance

9 Small Business Lending 1. CREDIT: WHY ARE LOANS DENIED? Short sales and foreclosures, second homes, investment property, Loan modifications on primary residence to manage payments ANSWER: Look at entire report and if other debts were being paid, focus on collateral and cash flow; also look at other credit indicators, like a public records search

10 Small Business Lending WHY ARE LOANS DENIED? 2. CASHFLOW: Lack of Historic Repayment Ability on tax returns; many micro businesses do not report all income, especially cash, on returns, and charge any and all expenses to the business. ANSWER: Need to teach micro and small businesses why accurate tax returns are important, not to just avoid the IRS, audits will occur after 3 years of consecutive losses. Entrepreneurs on extension should be advised to show profit if there profit, and don t let their tax preparer save on taxes and kill their chances at a loan Also, look at Bank statements, and identify non recurring expenses on returns

11 Why are loans denied? 3. Collateral: More than RE Vehicles Business assets, inc inventory Below market leases Royalties, licensing income ANSWER: Its about repayment assurance, not liquidation

12 Its about DEPLOYMENT Its your job to deploy capital to small business and entrepreneurs that but for your time and effort will not grow and create jobs So make that your goal You will make mistakes Learn Businesses will fail - collect

13 Goals Microlending: 1 FTE = 3 loans per month totaling approx $30k =$360k per year Small business: 1FTE= 1 loan per month totaling approx $100k= $1.2 million per year