Posts

www.sbclending.com/


SBC Consultants JPG

www.sbclending.com/

Over the past 11 years, we have been assisting Small Businesses get Certified with either the Federal or State Government. Typical questions always comes up.

1. Why do I need to Be Certified?

2 . How will it help me?

3. How much Does it cost?

4. What We Recommend.

These are all very important questions of course, which all business owners deserve to know. In this article, we will try to answer these questions and hope that it will give you the ability to determine if indeed it ‘s worth it r not.

It is first important to understand that there are many different certifications available. There are Federal, State, County and City Certifications with different variations for different departments such as metro, airport commission etc. We will be speaking in general terms. Knowing which one would benefit you most is critical. This article will focus on the general topic of certifications.

1. WHY DO I NEED TO BE CERTIFIED?

For the more complex  Certifications such as the SBA (8a certification) or the States Disadvantage Business Enterprise (DBE) Certification, you will need to make a determination if you can bid and win contracts to increase revenues. These certifications are harder to get due to their complexity and more expensive if you desire to hire a professional consultant to guide you through the process. It is an investment, which if utilized correctly can prove to be very rewarding.

For the less complex Certifications, such as the Women Owned Small Business Contracting program (WOSB) there are two reasons to get the certifications.

1. contracting- To bid on Government jobs.

2.Marketing- Use it to market yourself as a Federally Certified Company.

2. HOW WILL IT HELP ME?

Small Businesses like us are always looking to find new revenue streams to increase sales. We sometimes add new services, give discounts etc. to entice people to buy or choose us and not our competitors. The Government has created programs to help Small Businesses compete in a more fair environment. They realize that the backbone of this economy are Small Business and if we don’t survive, its 2008 all over gain.

In order to keep things fair, the Government requires that all Federal, State and Local agencies give a percentage of their contracts to certified companies, disallowing large corporations to take part. For example, let’s say for argument sake that there are 1000 construction companies in the United States. 500 are 8a certified and 500 are not. Only the 500 that are 8a certified are able to bid on that particular contract reducing the competition to 50%.

3. HOW MUCH DOES IT COST?

This is a difficult question to answer. There are plenty of consultants out there who make money assisting businesses get certified for the different certifications. Depending on the complexity of the Certification price ranges will vary. For example, the SBA 8a Certification will be significantly more expensive then say the Women Owned Small Business Certification. There is certainly more work to be done and a lot more hours put in to the 8a compared to the WOSB.

4. WHAT WE RECOMMEND:

A. Work with a local firm: These Certifications require a lot of one on one time and proprietary information being shared, such as tax returns. A local firm can meet with you in person making the process easier.

B. Experience: The experience a firm hold is crucial in getting approved. It is always a benefit if the consultant has a certifications background but also educated in finance, accounting and law.

C. Return on Investment: What is the potential of increasing sales through contracts? If you are paying $1000 for a certification and the contract is for $10,000 is it worth it?

SBC Consultants, Inc is Government trained. We pride ourselves in working with only local firms giving us the ability to give the best customer service as possible. To learn more about our certifications please visit the certifications page on our website HERE.

Paul Mazbanian

Paul Mazbanian

CEO

Small Business Community Consultants, Inc.

Email: paul@sbclending.com/

Tel: (818) 551-9400

What to Expect in 2013:

As 2012 passes us by and 2013 becomes reality, Business Owners are wondering what changes will take effect be in 2013 compared to 2012. Our answer is simple, a lot of the same old same old.

 Business Loans:

  • Lenders are always introducing new programs to entice Business Owners to apply, but the lending guidelines will not change. That is, as our April 18, 2012 article (http://sbclending.wordpress.com/2012/04/18/hello-world/) states, the 5 C’s of credit will very much be in effect. Lenders will continue to be strict in order to minimize their risk.

Business Certifications:

  • While lending guidelines continue to remain tight, Business Owners SHOULD always be thinking of ways to grow their customer base. Certified Companies will always have more opportunities then non-certified companies. That is, the Government has reserved new opportunities only to those businesses that are certified. Intern, those who are not certified will not be able to bid on that job. Here is a link to our Certifications page, we hope you will find it helpful. 

Image

http://www.sbclending.com/

Loans for New and Existing Businesses

The subject of our first article was about the 5 C’s of Credit (Character, Capital, Capacity, Collateral, and Conditions). In addition to credit, lenders are looking for businesses that are financially stable, which I will discuss below.

Existing Businesses

Lenders prefer to do business with existing companies due to their multiple years in business. Lenders prefer this route because they can track the progress an existing business has made over the years, which is done in multiple ways:

  1. Collecting previous years tax returns
  • Tax returns are the only official document which allows the lender to see how much a company has made in the past. Cash flow is a term used by lenders to determine pay back ability. Gross receipts will show the sales of a company, but the net income will show the companies profit after expenses.
  • In some cases, companies are making more then is being reported to the IRS. A few weeks ago, a client who owns a coin laundry business contacted me for a loan. Client claimed to make over $1,000,000 in sales. His tax returns however showed revenues of $20,000 and a net loss of ($10,000). When I asked the client what happened to the $1,000,000 in sales, he replied “we are a cash business and don’t report the income.” As you can imagine, this was a problem. Since he is receiving cash, he is not reporting the income to the IRS and therefore it is not being reflected on their business tax returns. Since the tax returns are the only reputable report to verify income, the lender can not take his word on his total sales.

        2.  Financial Statements

  • The profit and loss statement: During any given year when the company has not yet filed for their taxes, the profit and loss statement will allow us to see the year to date revenues and expenses of the company. This will give us a good idea how the company pairs up compared to previous years. I would ask this document to be prepared by a CPA  for authenticity.
  • The balance sheet: It will give us a good idea where the company stands with their assets and liabilities thus giving us the eventual net worth of the company. This document is important to see how the company manages its debt. It will show all assets compared to its liabilities giving us either a negative or positive. A negative net worth tells us that the company has more debts then assets which means they owe more then they own. A Positive net worth tells us the company owns more then it owes. This should also be verified by a CPA.

The above mentioned items will allow us to get a grasp of a companies pay back ability. There are however, other documents needed while processing a loan. They include but are not limited to:

  1. Business debt schedule
  2. Personal financial statement
  3. Personal Tax returns

New Businesses

Since new businesses can’t provide tax returns from previous years, it is crucial to have excellent credit and a sound business plan when applying for a loan. All new business owners must realize that having great credit is crucial when requesting for financing. The following two items are just two of the most important items needed for New Businesses. However, when getting a loan package together there will be additional items requested.

Needed Items

   1.  Credit

  • As our previous article states, credit will determine how risky you are to a lender. Hence, having a low credit score will give a lender the impression that you are not trustworthy. Therefore, understanding your credit report, how much you owe on credit cards relative to the limits on those cards are important. Lenders will take in to consideration how much debt an individual already has. The lower debt you have the less of a risk you are to lenders.
  • Also, having a high credit score does not necessarily mean that you will get approved. The days of approving based on your score are over. Lenders now are more interested on what makes up your credit score and will want to make certain that your credit report is clean.
  • Example: I received a call from a client who had just moved to the states a few years ago. He does not have any credit cards but does have a vehicle he is leasing. He has never been late on his payment. His credit score is a 720, a respectable score by today’s standards. The client wanted to start a business with some money he had been saving and inquired about a Small Business Loan. When I asked for his credit report, I saw that it wasn’t much of a report. The only reported credit he had was the lease on his vehicle. I advised the client not to apply for a loan, but rather begin building his credit by obtaining small credit cards. By using and paying them off every month, he would have established credit slowly. He did however decide to apply for the loan and not take my advice. He was declined!
  • Why did this happen? The main reason for the decline was due to lack of credit history. The client did not have enough credit at the time for an approval. Lenders are looking for business owners to have a good amount of years behind them borrowing and paying off debt.

2.   Business Plan

  • A business plan is crucial for start up companies because it is the only way to show a lender how they will be repaid. Thus, creating a sound business plan will be crucial in obtaining any type of financing. A business plan should explain everything about the business and its owners. A business plan can be the determining factor of an approval or a decline.
  • Creating a Business Plan takes effort and time. Our last article outlined the Table of Contents we feel is crucial in creating a great business plan.
  • Please visit our business plan link on our website http://sbclending.com//services-business-plans.php

Paul Mazbanian (2011 SBA Young Entrepreneur of the Year – Los Angeles District Office)
SBC Lending
http://www.sbclending.com/

What You Really Need to Secure a Business Loan

What is the secret for receiving an approval for a Business Loan?

There are 5 critical characteristics a lender takes into consideration for businesses seeking a loan, commonly known as the 5 C’s. Although many know what they are, below is an explanation of each specifically from the perspective of the lender.

  • Character: The most important tool a lender uses to determine how risky you are is your credit history. It enables lenders to see your history of transactions and if you have been late or not on your payments. Your personal credit history is the best way to determine the reliability of your character.
  • Capital: In addition to your credit, lenders will determine their risk based upon the project at hand. In a perfect world, lenders would like to have zero or the least amount of risk as possible. In most cases this does not happen, which is why lenders like to see how much money or capital you have personally invested into your project. The more you invest in the project, the less risk a lender takes; therefore the more likely your project will be funded.
  • Capacity: The ability one has to repay the loan. Due to their short history, new businesses lack this. However, existing businesses can provide capacity by providing previous years tax returns. This is the only way to evaluate how the company has done in the past and to measure the potential it has to grow in the future. Nevertheless, new businesses can provide capacity through secondary sources of income or an outside source of revenue that does not come from the business, such as a spouse’s income or rental real estate.
  • Collateral: Any individual asking for a loan should be ready to give up something to satisfy the lender. A lenders objective is to minimize risk and one way to accomplish this is by taking collateral. Collateral can include anything from equipment to real estate, depending on the amount of the loan requested. In some cases collateral is not necessary, but individuals seeking a loan in excess of $25,000 should be prepared to offer some form of security.
  • Conditions: Conditions largely relate to circumstances that we have little to no control over. In recent years, the economic recession has been a condition in which lenders have taken a more conservative stand on lending and have instituted stricter guidelines. If your business is sensitive to economic downturns, lenders will want to know that you are competent at managing productivity and expenses.

Typically, lenders like to see a borrower secure 4 out of the 5 C’s when applying for a loan. This way, they can be certain that their money will be repaid in a timely manner and in full. If you do not secure 4 out of 5, then we recommend putting a plan together to map out how you will be securing at least 4 out of the 5 C’s in the future.

Paul Mazbanian (2011 SBA Young Entrepreneur of the Year – Los Angeles District Office)
SBC Lending
http://www.sbclending.com/

Source: http://EzineArticles.com/?expert=Paul_Mazbanian