bank financing for small business
DESCRIPTION
Financing Small Business- Bank FinancingTRANSCRIPT
Presented by Anna Xiaodan ZhengBusiness Banking Manager, Chase Business Banking
Asian Women In Business
Bank Financing for Small Business
Business Line of Credit
• For business that needs to borrow on a revolving credit line basis for working capital (normally use it for short-term or immediate capital
needs), Ex: Seasonality, Immediate cash flow needs, business expansion,
time frame for account receivables, etc.
The Benefits of Line of Credit:
o Using other people money to invest for your own business (Leverage)
o Access the money when you need it ( funds available immediately)
o Ease the pressure for short-term cash flow, more capitals to manage
o Low cost, tax deductible (expenses for the interests & fee).
o It is an umbrella for unexpected rain
Features of line of credit:
• Interest rate is Variable
• Available Credit Line Amount: $10,000-$250,000
• Rate Pricing may base on credit history, collateral type, business relationship & business categories, also refer to revolving rate.
• Collateral Options- can be secured or Unsecured
• Monthly minimum payments are required and repayment replenishes line availability as long as revolving status continues in good standing
• Is supported by the personal guarantees of the owners / principals, or other Business
How to Access to line of credit:
• access card with cash back rewards
• Line of credit checks
• Phone transfers to Business Checking account
• Website
• Transfer in any branch locations
Business Term LoanBorrowing over a specified period of time, (normally use it for
specific needs in specified time), such as purchase equipment, renovation, consolidating existing loans.
Features of Term Loan:
• Fixed or variable rates of interest
• Variable, indexed to prime rate, pricing based on the credit history and business banking relationship
• Range of terms: 12 months – 84 months
• Loan Amount $5,000-$250,000
• Principal and interest payments are repayable in convenient monthly installments
• Fixed monthly payments of Principal and interest
Other type loans
Owner Occupied Commercial Real Estate Loan:
For purchase or refinance of a commercial property that is at
least 51% occupied by borrower.
• Minimum Amount $50,000- $3,000,000
• Maximum Loan to value is 80% of property types
• Fixed rate fully amortizing loan available for up to 15 years, Balloon Loans may have an amortization up to 25 years
• Adjustable rate loan typically adjust every 3, 5, 7 years at a margin over the US Treasury Constant Maturity Yield
Equipment Financing
• Get money to buy business’s equipments.
Benefits of financing- No down payment or minimum down payment
- Financing through all the costs, examples of shipping, installation, training
- 2-5 years terms, ( fixed monthly)
- Saving money on start-up capitals
- Tax advantage ( depreciation, maintenance expenses)
SBA- Small Business Administration
SBA Express: • Loan amounts: $10,000-$350,000• SBA will guarantee 50%
SBA 7 (A): • Loan amounts: $250,000-$500,000.• SBA will guarantee up to 75%• Working capital, inventory purchasing, Account receivable cash flow cycle,
Business expansion, debt refinance, real estate improvement, or business acquisition, etc.
SBA 504:
• Up to 40% or $5,000,000.• Real estate financing( land and building)• Construction and improvement • Heavy Machinery
5 C’s – Evaluate Risks
• Character- The willingness of the customer to repay. The principal of Character is honorable and trustworthy.
Observed in the way relationship are handled with
-Suppliers
-Customers
-Employees
-Creditors
5 C’s – Evaluate Risks
• Capacity- the Ability of the customer to repay
The point of financial analysis is to determine whether or not a borrower is able to repay the obligation
Measured by calculation- debt service, debt to income ratio,
The source of repayment
5 C’s – Evaluate Risks
• Capital- the Funds that support the assets and operations of a company
Sources of funds – sufficient to support Normal Operations, Economic Downturns, Potential Losses, expected
growth
Funds from Owners (Personal, Investors, or Creditors)
Preserved cash VS Liquidity & Leverage
5 C’s – Evaluate Risks
• Collateral – The assets which provide a Secondary Source
• Collateral types
Account receivable 70%
Inventory 40%
Equipment 50%
Marketable Securities 65%
Cash 100%
5 C’s – Evaluate Risks• Conditions- The Operating Environment of the
company
• Measure by various conditions:
o Government regulationso Economic Cycles o Competitiono Consumer Preferenceso Labor Challengeso Industry dynamics
The Sixth C- Common Sense
• Business owner who can’t explain how they make money
• Does their business make sense to you
• Should it be.. Reasonable
Logical
Defensible
How Credit Score Computed
Tips to Improve your credit score
• Use two or three credit cards each month and make payments on time.
• Do not max out your credit cards. Attempt to keep your balances below 30% of your credit limit. This will present a healthy debt-to-credit ratio to lenders.
• Do not cancel old credit cards b/c they carry the longest length of your credit history.
• Do not apply for new credit on a whim. Each time you submit an application to a lender or credit card company they pull a copy of your credit report. This is called an inquiry. Too many inquiries in a short period of time can lower your credit score.
Credit Bureaus
• www. Annualcreditreport.com
• Equifax 1800-685-1111
www.equifax.com
• Experian 1888-397-3742
www.experian.com
• Trans Union 1800-916-8800
www.transunion.com
Banking Document Requirement
• Business Certification, Federal Tax ID Number
• Government- issued Photo ID
For Loan or Line
Business Tax Return
Personal Tax Return
Personal Financial Statement
Interim Balance Sheet and Income Statement
Residential Mortgage required documents
• 2012 &2013 tax return (Personal & Business); W2s/or 1099
• Signed year to date profit & loss statement
• Most recent two months bank statements
• Recent one month paystubs (if applicable)
• ID copy
• Executed sale of contract (For purchase)
Exclusive benefits for residential mortgage
• 1% Mortgage Cash back on annual principle + interest payment (up to $500)
$2,000/month * 12=$24,000/ year
$240 per year
* Set up mortgage payment automatically deducted from a Chase personal Checking
account within 60 days after closing to qualify.
• LMI (low-to-moderate income)
up to $1,500 for Purchase only
42 Broadway, Suite 1748New York, New York 10004Tel: 212.868.1368 - Fax: 877.686.6870
Email: [email protected]
Asian Women In Business