| >Finding a Business Loan |
| Posted by: H. Harris Oct 7 2003, 12:12 PM |
| Hello, this is my first time using this so I pray I am doing this correctly. I am a concerned wife asking for your help. My husband has had this dream of owning his own production company every since I can remember. My goodness I was 19 years old the first time he mentioned it to me. Anyway, that dream is slowly becoming a reality. We have been together for 10 years and married for 12 years. Anyway, we have A+ credit. We have invested majority of our own funds into this business. My husband has almost exhausted his 401K to get this done. We have an office building we lease here in Texas for the production company. However, I know there is a better way. We shouldn’t have to exhaust all of our life savings and investment to do this. I know you have to show that you can pay a business loan back, however, how can you do this when we don’t have a business account? We have been using a separate checking account because it is cheaper and has less penalties. The business has not made a “profit”, because of the lack of book-keeping. We don’t have any P&L statements. We just decided that when filing our tax returns this year to list our loses. I hope we can do this? The business just has been going from day-to-day. We both work full-time jobs plus my husband works his business part time. Now, my husband wants to do this business full-time. Where can we go! Do you know anyone that could help us here in Texas to get a business loan so not to exhaust anymore of our personal funds? I have so many questions that I wish someone can sit down with my husband to sort out the business finances. Please respond to tell me where I can go for help! Signed a desperately seeking wife. |
| Posted by: Rick Oct 7 2003, 01:12 PM |
| Hi there. Many times I see clients who are seeking financing but have not taken the time to develop a complete business plan. Often, people who start a business using their own sources of financing do not feel that producing a business plan is necessary; however, a well thought out business plan is vital and will act as a road map to ensure that the business is progressing. Small business owners can, in many instances so long as the business is not incorporated, file personal income taxes as a self employed individual [this is the case in Canada … I am not sure of the taxation laws in the US]. My suggestion would be to contact your local economic development agency (Municipal, State or Federal — most jurisdictions have one). They will be able to either help you with the preparation of a business plan and or point you in the right direction. Also, they will be able to provide you with different lending options that may be available. Hope that this helps you a bit. Cheers, |
| Posted by: loanuniverse Oct 7 2003, 01:23 PM |
| Dear Mrs. Harris: I am a big believer that one should go for their dreams. I can also see by your post that you are not kidding when you mention that you have a lot of questions. In order to organize things properly, which includes getting financing, you will need the help of someone that can actually go over the numbers with you. The need for someone to sit down and go over the different alternatives is there. Therefore, the first and best thing to do is contact someone locally to assist you. Just like any type of analysis, one never knows the questions that might prop up during a meeting like that. In addition, your questions are not only related to financing, but also touch areas such as taxation, personal finances, legal questions and startups. While I have some knowledge on all those areas, I would have to say that my strong suit is commercial lending and hesitate to go in depth regarding the other matters. For a good place to find tailored help, I can recommend the http://www.score.org site, there are many chapters of this non profit organization and hopefully there is one near you. Having said that, let me see if I can still give you some feedback that might be of some help. We shouldn’t have to exhaust all of our life savings and investment to do this. I know you have to show that you can pay a business loan back, however, how can you do this when we don’t have a business account? In your situation, we are talking about startup financing. Most lending institutions do not like to do these types of loans. The good thing is that the Government through agencies such as the http://www.sba.gov have programs in place to help entrepreneurs. The fact that SCORE works in partnership with the SBA is another big plus as they might be able to help you in applying for a loan. A business plan will be a necessity. There is an article where I wrote about how to write a business plan Print it out and familiarize yourself with what will be required. The final business plan that you might end up doing will be a little different, but basically have the same ingredients. The business has not made a “profit”, because of the lack of book-keeping. We don’t have any P&L statements. We just decided that when filing our tax returns this year to list our loses. I hope we can do this? I have to disagree with that statement. The lack of bookkeeping does not create the profit or the loss. You either made money or you didn’t. The difference is whether or not you have kept track of your bottom line. Some things that come to mind after reading that statement are: 1 In order to get credit for the losses, you will need to prove to the IRS that you had a loss on the business. Therefore, you need to track your revenues and expenses. This means that you will need to reconstruct the numbers for the whole year. 2 You need to get some kind of financial record-keeping software going. I recommend Quickbooks, when I used to do small business loans more than half of the borrowers used that software. There are others such as Peachtree, but I think Quickbooks is the market leader. 3 Yes you can deduct the losses in the business. You would be filing a “schedule C” along with your income taxes. Eventually, you might decide to incorporate in order to insulate yourself from liability. This is another thing that you might want to talk to the counselor about… which type of legal entity fits the best? 4The decision to leave the security of a full-time job should be taken carefully. You mention that the business is not profitable. Would this change if your husband was able to dedicate 100% to it? I am sorry that I could not be of more help. I also know that the whole process can be confusing, but it really isn’t. The most difficult part would be creating the business plan and hopefully you will be able to get someone to help. Even if you don’t, there are a lot of resources in the internet or in your local library that can serve as a guide. Once the plan is prepared, you will have a good idea of what your financing requirements will be in order to pull it off. Good luck. P.S: Thanks Rick for the contribution. |
| Posted by: asahc@aol.com Oct 8 2003, 09:45 AM |
| Thank you very much for your replies. We have a corporate lawyer friend that just started helping us. This morning believe or not we received a confirmation that our paperwork was received to be Incorporated for our business. It just seem like the process is taking a lifetime. Thank you for you suggestions. I will looking into the SBA business loans. Signed the a concerned spouse. H. Harris |
