A few general questions - loan for startup
by artistusa, Window Shopper
- Created: June 8, 2013, 12:13 am
- Updated: June 8, 2013, 12:16 am
Sorry for the big block of text, the line breaks don't seem to work here. // I'm in the process of starting a new business, it will be a retail space offering creative services. I've got a business plan being drafted and researched what I could about SBA loans and familiarizing myself with startup funding and costs. // I spoke to a bank (a large regional bank, not a small one) where I've housed my main accounts about setting me up with an SBA officer and asked the business banker there a number of questions but I wasn't sure about some of the information he provided. I didn't want to cause him to feel like I was too skeptical so I thought it best to research some more as I go through the process. // The things I'm not sure about: // - He said their bank does a 50/50 split where 50% of the loan is guaranteed by the gov and 50% by the bank. I told him I was under the impression the gov guaranteed 75%-85% depending on the loan amount and circumstances. The explanation he provided seemed a bit vague to me. // - Presuming the 50/50 split is normal, I told him that I didn't want a situation where the bank is so much in stake with the business that they would meddle with it and make it a pain for me to run the business if anything hiccuped even a little. He assured me that wouldn't be the case but life has taught me that when it comes to money, something like that is all talk and what really matters is what the terms are spelled out in black & white. // - He encouraged me to consider a bigger loan. I told him I already worked out all the potential expenses and, even in the worst case scenario I would need far less than that. Considering the "50/50" thing he stipulated before, I don't see why a larger loan (and therefore a larger risk) by the bank would seem logical unless his main goal was to front-load the early payments with even more interest, with the extra money not being of any practical use to me. // The things I don't know how to address: // - I'm typically gainfully employed. I've run a business before that was profitable for a number of years, and sold it off before going back to a 9-5 3 years ago. Last year the company laid off employees and I decided to start up a business again. I have good credit but for the past 12 months I've not been working or generating an income while I researched what I wanted to do and how I wanted to do it. I've only had some income from contract work but not very much as I didn't want to be distracted from my main goal. Is this going to be a problem? Since the business is going to be solely owned and operated by me, of course it will be my job but in the meantime I don't know how a lack of income for the past year might affect me. // - I don't have much in the way of cash or property for collateral. I don't own a home. All I have is a modest savings account, 401K investments, and a car that's paid off. Nothing else I own can really be used as collateral. Before I left, the banker wanted to make sure I gave him every piece of info I could about where any assets that I did have were so that the info could be submitted. // Frankly, it gave me the feeling of having a vulture circle around me. I'm fully confident I can make the business work, my conservative projections show I'll be profitable within 1-2 years if not sooner, yet even before I start this process for real with a bank it's giving me a feeling of trepidation and concern that the bank will make me spend 2/3 of the time answering to them and jumping through hoops rather than being allowed to run the business properly. If I had the capital to do this on my own, I would, but I'm not in that position so an SBA loan is really my only legitimate option.
- Community Home
- Discussion Boards
- Tell Us...
- Discuss Popular Topics
- Developer Resources
- Social Media