Starting a Business

Dear Ms Gleba,

I am a struggling Michigander in this tough economy. I am currently working, but would love to open my own business. Are there any government loans that I can get that could help me get a new business started in this state? My credit is too bad to do it on my own, due to multiple layoffs. Is there anything that I can take advantage of to start a business in Michigan?

Help, B

Dear B,

Don’t quit your day job yet! Save twice as much as you think you’ll need to get started because unexpected expenses will arise. If the business that you want to start is similar to an existing business, I suggest you work in that business and learn everything you can about how to run it such as financials, marketing, and operations. A great organization to get you started is SCORE, a premier resource for business owners. Also, the SBA (Small Business Administration) is another great resource to use in getting your business started and exploring all of the options regarding loans and grants for your business. (Both organizations can be found on the web by typing in SBA and SCORE in your search engine). The following information regarding borrowing money is from the SBA website.

Even though the SBA-qualifying standards are more flexible than other types of loans, lenders will generally ask for certain information before deciding to use an SBA loan program. Generally, a business will need the following documentation to evaluate your loan request: 

· Business profile. A document describing type of business, annual sales, number of employees, length of time in business and ownership.

· Loan request. A description of how loan funds will be used. Should include purpose, amount and type of loan.

· Collateral. Description of collateral offered to secure the loan, including equity in the business, borrowed funds and available cash.

· Business financial statements. Complete financial statements for the past three years and current interim financial statements.

· Personal financial statements. Statements of owners, partners, officers and stockholders owning 20% or more of the business.

The strength and accuracy of your financial statements will be the primary basis for the lending decision, so be sure that yours are carefully prepared and up-to-date.

The most important documents in your financial statements are:

· Balance sheets from the last three fiscal year-ends.

· Income statements revealing your business profits or losses for the last three years.

· Cash flow projections indicating how much cash you expect to generate to repay the loan.

· Accounts receivable and “payable aging,” breaking your receivables and payables in to 30-, 60-, 90- and past 90-day old categories.

· Personal financial statements from you and your business partners listing all personal assets, liabilities and monthly payments, as well as your personal tax returns for the past three years.

Do your homework, save some money, and get some experience in your field before you start your own business. The better you are prepared, the better chance of your success.

Good Luck! Jill

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