Banker meeting

OK, so I just got home from seeing the banker.

I was nervous, but not overly so, as I have all my ducks in a row when it comes to my business :)

I asked what criteria is used to judge the creditworthiness of my LLC business. I was informed that, since I have no records of income as a start-up, my personal credit would be checked and used as a factor in the decision. I had suspected this was the case, and have been steadily improving my credit for the past three years. Still, it's not phenomenal credit- they want a score of at least 700, plus a low Bankruptcy Score. I've never heard of a Bankruptcy Score, so I have to look into that- but it's like golf, the lower the number the better. My banker Lisa informed me if your Bankruptcy Score is higher than your personal credit score, forget getting approved.

SBA loans require at least a 10% collateral, which I will provide in cash. Additionally, SBA funds are only used for tangible assets, not operating expenses. So I have to rewrite part of my business plan for the Loan Fund Dispersal Statement, to show purchases of a material type. As an example, advertising is not a tangible asset, whereas equipment and inventory are. Basically, they want to know they have something they can put their hands on to sell if you don't pay on your loan.

A detriment to my case is the fact that I rent an apartment; owning a home would show more permanence and stability, even if I didn't use the home as collateral. The kicker is, I can't get approved for a home until I have a stable income, which the business would provide. Ye old catch 22. Not that this will stop me from getting the business launched, OR getting the home we've had our eye on for a few months.

A positive factor on my side is the fact that I worked with a Small Business Development Center for almost a year, during which time I refined my business plan. The SBDC had my plan evaluated by a SCORE counselor, who was very impressed and said it needed no revisions. Lisa provided the number of the local SBDC branch, which was nice since I hadn't found it online.

The paperwork can take anywhere from 1-3 weeks to process, depending upon how prepared I am and how well I fill it out. Lisa advised me that a good rule of thumb is one month; since it takes an average of a week to receive funds once approved, that sounds like a reasonable time frame.

Things to do to get ready for the loan: pull my score (I have my reports from all 3, but hadn't done that yet); pull my Bankruptcy Score; register for my tax ID; rewrite the Loan Fund Dispersal Statement; rewrite my COGS (a whole 'nother post); talk to local SBDC to see if I've missed anything.

I already have the information for the tax ID, and that process should only take about a week.

That's all for now, dinner is waiting.