Taking that first step and starting your business is intimidating, but it doesn’t have to be. Check out advice from our President and CEO Kim Sponem to get you ready for that leap.
I have been saving to start a business. If I find I need some capital, what are some things I need to know?
I am so glad you asked. As the CEO of the credit union that works with many small business owners and has provided more Small Business Administration (SBA) loans in the state of Wisconsin than any other credit union for six years in a row, * I am excited to address this.
First, congratulations on your business and saving up to start it! Keep saving as you develop your idea and business plan.
As part of the process, entrepreneurs often share their ideas with family or friends willing to provide funds either directly or through crowdsourcing; most start-ups are initially funded this way. These funds are important because lenders want to know that you have a financial stake in your business’s success. Not having enough capital is the number one reason businesses fail. It’s key to have a couple years of savings to cover cash flow, so you can make the right spending decisions along the way.
Other key points to remember when approaching your financial institution:
- Show that you can become profitable fairly quickly (usually within about six months)
- Show your ability to pay off your loan as part of your long-term strategy. If the business takes longer than six months to show a profit, it may be too risky for some lenders or for the SBA. This doesn’t mean you shouldn’t start your business, but it might mean it’s not a fit for a certain financial institution
- Have a good personal credit history
- Demonstrate what your business does differently that will make it successful
Key elements of your business plan should include:
- Executive summary – overview of entire plan, written last
- Personal background – profile of skills, experience and how they relate to the business
- Business concept – description, goals, industry information and how your business fits into the industry
- Description of your organization – ownership, key employees and technology
- Marketing plan – market analysis, competitive analysis, strategies, promotional/marketing materials, etc.
- Financial plan – sources and uses of funds, and three years of financial projections with supporting assumptions
- Attachments such as letters of intent and published articles in which your business has been discussed or you have been cited as an industry expert
- Personal federal tax returns – though not always required, keep them handy. At Summit Credit Union, for a start-up business loan application, we’ll look at your last three years of personal federal tax returns and a personal financial statement. And there may be a few SBA forms as well
I strongly recommend working with groups like the UW Small Business Development Center, Wisconsin Women’s Business Initiative Corporation (WWBIC) or SCORE. These organizations provide technical assistance, and offer classes and consultants/mentors whose focus is to support business planning and a start-up business plan to have available for your visit with a lender.
Summit can help you prepare for your business launch and give you the knowledge and tools you need before, during and after you make your business dream a reality.
Best wishes in your business venture!
*SBA Lender of the Year for Credit Unions as awarded by the Small Business Administration of Wisconsin in May 2017.