from would-be borrowers. The worst thing a
loan applicant can do is lie about his income
or assets. If the numbers he gives us on his
application fail to match the numbers on his
tax return and bank statements, he’s told us
all we need to know about whether we can
trust him.”
Small business owners approach the
loan process as if it were a potential selling
point. Excited about their business, entrepre-
neurs talk more about the future success of
the company rather than the current bottom
line. “Another mistake applicants make is as-
suming we will give them a loan based only on
the profit they think their businesses will
make in the future. There is a place for ambi-
tious goals, but loan applicants should re-
member that lenders care more about the
amount of income they earn now than the in-
come they think they can earn in the future.”
There are lots of financial organizations
like The Intersect Fund that want to help new
businesses succeed. But you’ve got to help
yourself first. “Before applying for a micro-
loan, or any loan, for that matter, a person
should complete a quick, personal finance
evaluation. First, are you current on your
mortgage or rent? Second, are you current on
taxes and, if applicable, child support pay-
ments? Third, do you have room in your
budget for loan payments? A person who an-
swers “no” to any of those questions has no
business applying for a loan.”
When writing a proposal, you think of
interesting, unique ways to make yourself
stand out. This too is necessary in the micro-
loan application process. “A person who com-
pletes the evaluation unscathed can take a
couple of steps to make his or her application
stand out” - shares Joe. “First, you should
make sure you have a clear idea of how much
money you seek and what it will pay for. For
example, a person who asks for $4000 to buy
a specific used food-truck is a much better bet
for a lender than someone who wants $10,000
for “general expenses”.”
“
Second, you should save up as much
money as you can to contribute to the pur-
chase for which you seek the loan. It’s safer
for a lender to lend you $3,000 toward the
purchase of $6,000 truck than to lend you the
whole amount.”
“
Third, you should know the types of
things lenders are most willing to help pay for.
It’s always easier to lend money for assets
with re-sale value (like equipment, buildings,
property, automobiles, etc.) than for expenses
like rent, payroll or advertising. The reason —
and it’s not a pleasant one — is that the lend-
er knows he can repossess assets that have re
-
sale value. He has no way of repossessing
the money an entrepreneur spent on rent over
the past year.”
The popularity of microloans are in-
creasing. “...banks are as reluctant as they
have been in recent memory to lend to busi-
ness owners. The resulting scarcity of credit
presents an opportunity for microlenders to
gain market share.”
“
Another factor - as far as I can tell—
more people are starting businesses. I am
speaking with a lot of people who have been
forced out of the corporate world or who have
given up on it in favor of starting businesses.
Many of these new entrepreneurs have turned
to microlenders for the resources they need to
launch their new businesses.”
There is much to think about and do
before applying for a microloan. “We at the
Intersect Fund have put together a list of the
things all business-owners should have to give
themselves as good a chance as possible to
succeeding:
A Marketing Plan
:
even it it’s just a one-
page document describing the business’s
target market and listing a set of sales
goals, it will help ensure a business own-
ers uses his limited marketing resources
(
time, energy, etc.) wisely.
To be registered
:
a business owner should
determine which type of registration (sole-
proprietorship, limited liability company,
corporation) is best for him and secure it.
A budget
:
a business owner is his own
boss. You will need to hold yourself ac-
countable. A spreadsheet listing your ex-
pected earnings and expenses for the
coming year will help you stay motivated
and on-task.
Good credit or a plan to improve it
:
many
new business owners know their credit is
“
bad” but are unclear about the details.
Know your credit score and get copies of
your reports. You can see what is awry
and go about fixing it. Failing to do this
will make it extremely difficult to get a
loan—even a microloan—the future.
A bookkeeping system
:
business owners
should consider investing in a piece of ac-
counting software like QuickBooks; they
can learn it quickly and have tidy financial
statements at their fingertips. Managing a
business is hard; managing one without
knowing whether it’s making any money is
nearly impossible. –
Tonisha L. Johnson
WWW.TOMIMAGAZINE.COM
NOVEMBER 2012 98