Finding Money

How do I know how much money I will need?

Funding needs are usually determined by adding the amount of money needed to cover one-time startup costs including buildings, leasehold improvements, equipment, inventory and working capital for expected operating expenses. For additional information, you may want to purchase Mastering Loan Proposals or contact your local SBDC.

How do I get a loan?

Lending institutions typically look for the 5 C's when evaluating loan applications. The 5 C's are credit, character, collateral, cash and capacity. Lenders will expect business owners to contribute their own money to the development of the business before they will consider loaning money to a business owner. They also make decisions based on credit score, good character and ability of the business to pay back the loan. For detailed instructions on developing loan proposals, refer to the SBDC publication Mastering Loan Proposals. For further assistance preparing a loan proposal, contact your local SBDC.

Are there non-traditional loan sources?

Yes. There are several kinds of non-traditional sources of financing such as microlending programs, angel investors, venture capitalists and various other non-bank lenders. For a list of some non-traditional financing sources, click here.

What documents will I need to apply for a loan?

Typically, you will need a personal financial statement, tax returns for the last three years (if currently in business, both business and personal tax returns), as well as copies of contractual agreements (for example, a copy of a lease). Depending on the situation, lenders will likely want to see a business plan, or at a minimum, financial statements demonstrating how the loan will benefit the business and be paid back. If you are seeking financing for your business, you should consider purchasing our Mastering Business Loan Proposals book.

Is my credit score important when applying for a loan?

Credit scores are a critical decision factor in evaluating a loan application. Most financial institutions consider the way a person handles his or her personal credit a good indicator of how business credit will be handled. Prior to applying for a loan you should obtain a copy of your personal credit report along with your credit score. Even with a great business plan, a poor credit score can prevent you from getting a loan. The SBDC can help you asses the impact of your personal credit score on business financing.

How do I find out what my credit score is?

You can obtain your credit score from each of the three major credit-reporting agencies as well as other independent organizations. Unlike your free credit report allowable twice a year under Georgia law, you may have to pay a fee to obtain your credit score. Some independent organizations may offer a free credit report and credit score, but there is often a catch. It is important that you check these organizations for references before you provide them with personal information.

Are there government grants for my business?

Generally, there are no government grants available for small businesses. In fact, the term "grant" may be a misnomer, since grants simply pay for services the government needs done. Most government grants are awarded to non-profit organizations or local governments, not to private companies. One possible exception is for companies developing or exporting agricultural goods, including food and forest product. If you think you may qualify for one of these, click on reference. Another exception could be the SBIR or STTR programs, which fund the research and development of technological innovation that meets specific government needs. For more information on these programs, click on www.sba.gov/SBIR.

Does the SBDC provide financing?

No. The SBDC is an economic development program of the University of Georgia system and does not lend money. SBDC Consultants can help you identify sources of funding to best fit your financial needs.

Can I get an SBA guaranteed loan to refinance present debt?

Yes, if the debt is a business debt (i.e. not personal) and the refinance must result in a minimum of 20 percent improvement in cash flow.

Can the SBA lend me money?

No, the SBA does not directly lend money. However, it does provide guarantees which eliminate some of the risk to its lending partners, such as banks, community development organizations and microlenders. SBA partners lend money to small businesses based on the guidelines for each of its three loan programs. For more information, click on http://www.sba.gov/financing/sbaloan/snapshot.html.

What are angel investors and how do I find them?

An angel investor is a wealthy individual who provides capital for early stage or start-up businesses, usually in exchange for an ownership stake in the company. Angels often provide funding for businesses that need more capital than is available through personal and family investments, but are not large enough to attract venture capitalists. Angel investors often organize themselves into angel networks or angel groups to share research and pool their own capital. For more information, click on www.angelcapitalassociation.org or www.angelcapitaleducation.org.

How can I get access to venture capital?

As a rule, venture capitalists do not lend to small businesses because the large amount of dollars they invest (millions) are beyond the scope of most start-ups. In a situation where venture capital is an option, investors will look to share in the profits of the business and will expect a huge return in a relatively short period of time. For more information on venture capital, click on www.vfinance.com.

Are there grants for minority-owned businesses?

No. There are no grants available for minority-owned businesses. Grants are available for established nonprofit organizations for the purpose of training, community development or technical assistance.

Do certain groups get preferences on government lending programs?

No. Eligibility to qualify for an SBA-guaranteed loan is based on size standards and must be a for-profit business. However, the SBA Community Express loan program targets businesses owned by minorities, women and veterans as well as businesses located in HUB zones.

I've heard that foreign nationals get free money to start a business. Is that true?

No. Foreign nationals don not have access to free money. They use the same traditional and non-traditional financing sources to start their own businesses, as well as community-based financing options.

Are there special loan programs for minorities?

The SBA Community Express Loan Program is offered to designated geographic areas serving mostly low and moderate income areas and minority, women and veteran-owned small businesses.

 

Management and Marketing

How do I find and retain quality employees?

Many small businesses hire individuals they know or those referred to them by friends and family members. To hire specialized employees, small businesses might work with a staffing agency, headhunter organization, online resume database or simply take out an ad in the classifieds. Retaining employees after hire is very important because of the costs associated with turnover. Employees will stay at their jobs if they are adequately compensated and challenged by their work. For more information on finding and retaining quality people, contact your local SBDC.

How do I put together a marketing plan?

In developing your marketing plan it is important to analyze your current situation to see how you fit into the market. Based on your current target market and target area, it is important that you consider the following factors to include market share, competition, changes in demographics, attitudes, beliefs, norms and advances in technology. It would be useful to conduct a SWOT analysis to in order to ascertain your company's strengths, weaknesses, opportunities and threats. The analysis should provide you with useful information necessary to define marketing goals and objectives leading to the formulation of strategies aimed at meeting these goals and objectives.

How much should I spend on advertising?

The amount you should spend on advertising will depend on the industry and your type of business. A general rule of thumb is that small business owners should allocate from two to five percent of gross sales but as much as 10 to 15 percent of expected gross sales when launching a new product or service or when competing in the mass market. SBDC consultants are available to help you with industry information, delivery vehicles and planning your advertising budget.

What is the best form of advertising for my business?

Every business has a "best" method of advertising. Experience is a good teacher, so compare the methods used by your successful competitors with what you plan to do. SBDC consultants can help you evaluate advertising alternatives.

Should I advertise in the yellow pages?

For some retailers and service providers advertising in the yellow pages is practically a necessity (e.g. plumbers or tire dealers. ̃Yellow pages advertising can be expensive depending on your listing or ad size and cannot be changed for a year. To find out more about this form of advertising, you may want to contact the Yellow Pages Association.

How do I find new customers?

The first step in finding new customers is to specifically determine your target market. It may be broken down by age, gender, socioeconomic status, geographic region or any number of behaviors or lifestyles. Once a target market is identified, you can determine the best strategy for reaching it. SBDC consultants have access to demographic data, as well as expertise in designing effective marketing campaigns to target new customers.

How do I keep my existing customers?

The best way to keep customers is to give them quality service at competitive prices. A rule of thumb to keep in mind is the 80/20 rule--80 percent of your business comes from 20 percent of your customers. It is important to focus marketing efforts on those valuable 20 percent. Business owners must have a customer service plan in place and train all employees to maintain an excellent standard of service and strive to always meet customer expectations. The product or service should be the same every time. It is important to remember that doing business with your company should be pleasurable and memorable for the customer. Problems should be taken care of quickly and completely.

Do I need a website?

A website can be an effective marketing tool for some businesses. Before spending money on development and design, investigate whether or not your industry is dependent on this type of marketing. In addition, there will be costs associated with maintenance and hosting services. For more information on whether developing a website is something you should do, talk with your SBDC consultant.

Does the SBDC offer classes in marketing?

Yes. These classes provide useful information on how to market your business using effective and unique strategies designed specifically for small businesses. Learn how to maximize your marketing dollars and enhance your profitability. To find a class in your area or to register for an online class, click here.

Does the SBDC conduct market research?

Yes. The SBDC's Applied Research Division is available to provide in-depth customized market research for clients on a fee basis. Additionally, the SBDC International Trade Center conducts global business research. Local SBDC consultants regularly assist clients with identifying key information for inclusion in business or marketing plans or for compiling loan documentation.

I'm already in business. Do I need a business plan?

A business plan provides a reference for determining the degree of success of your business efforts. It should be periodically updated to reflect your current situation. It can be a helpful tool for developing a marketing plan, expanding your current business or obtaining capital for the future. You may want to purchase the book, "Mastering Loan Proposals." Additionally, the SBDC offers consulting services and business plan classes both locally or online.

What are the elements of an effective business plan?

A business plan includes sections on operations, marketing, management and finances. For an example business plan outline, click here.

Will the SBDC write my business plan for me?

No. However, the SBDC can assist you in developing your own business plan.

Who should write my business plan?

You should. Writing your own business plan will force you to think through important issues that you may not otherwise consider. Contact your local SBDC for assistance in developing your business plan.

Do you recommend business plan software?

The advantage of off-the-shelf business planning software is that it helps you organize your business plan and gives you good examples to help you craft your own document. Most software packages generate charts and graphs from the financial spreadsheets incorporated into the plan. The disadvantage is that these plans often look ?canned.? Loan officers receive hundreds of these plans and can instantly recognize them. If you copy the examples from the business plan software into your plan, loan officers will recognize that it is not your work and will probably discount its credibility. All you need to create your own business plan is a word processing program and a spreadsheet program. Your local SBDC office can provide you with guidelines, examples, individual counseling as well as classes to help you write an effective business plan.

How long will it take to write my business plan?

Writing a business plan is a difficult and arduous task and can take anywhere from 20 hours to several months. It depends on the complexity of the business venture or project that you are planning and how much information is needed to thoroughly complete it.

What legal entity should my business be?

There are a multitude of choices for your business entity but the most common are: sole proprietorship, partnership, C Corporation, S Corporation or Limited Liability Company(LLC). Choosing the legal structure for your business usually is a function of liability and tax considerations. Also, as businesses mature, their legal structure may change to accommodate growing complexities. Look at the principles and/or investors for considerations of liability, residency or tax consequences that can influence the choice. Secondly, examine the nature of the business to gauge risks inherit in its operations. Finally, consult with your accountant and legal advisor for input on legal entity choice.

Do I need a lawyer to start a business?

Even though an attorney is not required, we recommend you consult an attorney, especially if the company you seek to form has more than one owner. Forms and instructions for each type of business entity are available at the Georgia Secretary of State's office.

Where do I obtain a business license?

Business licenses are issued by the municipality or county in which your business is located and fees may vary by location and type of business. For more information, call your local city or county business license office.

Do I need a special license for my business?

Certain businesses are subject to special permits, licenses and inspections. These include schools, employment agencies, child care centers, securities dealers, motor transport, financial institutions, public entertainment, detective agencies, cosmetologists, heating and air, refrigeration, plumbers and electricians. Information about licensing, permits and inspections can be found through your local licensing or inspection office or through the Secretary of State.

What is the difference between an employee and an independent contractor?

If you have care, custody and control over how your "worker" does the job, classify them as an employee. Generally the definition of employee is an individual uses your tools, comes to work on your schedule, and you supervise their efforts. An independent contractor owns his/her own company and offers their services or products to several clients. For instance, a freelance floral designer who works overflow for several florists during the year is an independent contractor; the floral designer who only works for you part time is an employee.

Do I need Workers Compensation Insurance and how do I obtain it?

Georgia employers with three or more employees are required by law to carry Workers Compensation Insurance. This insurance is regulated by the State but sold by local community insurance agents. A minimum of three quotes is recommended. Owners that work in the business are considered employees but can exempt themselves from workers compensation insurance coverage. For more information, visit the State of Georgia State Board of Workers Compensation website.

Taxes

Do I need a state tax ID number and how do I obtain one?

Any small business that operates in the state of Georgia may be required for one or more tax-specific ID numbers. These may include Sales & Use tax, employee withholding tax, international fuel tax agreement, motor fuel distribution, coin-operated amusement machines, alcohol and tobacco. All employers are also required to have a Georgia Department of Labor number in order to pay State Unemployment Insurance on behalf of their employees. Applications are available on-line or through your local Department Of Labor office.

Do I need a Federal Employer Identification number?

Your business needs an EIN if it has employees, has a Keogh Plan, or files one of the following tax returns: excise, fiduciary or alcohol, tobacco and firearms. A sole proprietor with no employees and none of the other items listed above may still need an EIN for fraud protection, contracts procurement and some loan programs. To apply for a Federal EIN, fill out Federal Form SS-4.

What is the self-employment tax? Do I have to pay it?

Sole proprietorships and partnerships that report a profit are required to pay self-employment tax in lieu of Social Security and Medicare contributions. Self-employed persons may be required to make quarterly deposits of estimated federal and state taxes based on the profits of the business. For specific information, contact an accounting professional.

Are there local business taxes?

All businesses operating in Georgia are required to pay property (ad valorem) taxes on real and personal property of the business. Property taxes are assessed and collected by individual counties. The Georgia Department of Revenue web site ( www.gatax.org ) has links to local tax offices through the State Property Tax Division.

What business expenses can I deduct?

The IRS states that in order for an expense to be deductible, it must be ordinary and necessary in conducting the business. There are many rules as to the documentation that must be provided to maintain the deductibility of an expense. For assistance in clarifying these rules, contact an accounting professional or refer to IRS Publication 535.

Do I need to collect sales tax?

Yes. If you sell or rent tangible items to the final consumer, you must collect and remit sales and use tax. There are certain types of sales which are exempt. For more information, click on reference.
www.state.ga.us/departments/dor

How do I find a good CPA?

In choosing an accountant it is important that you consider an individual that possess a good working knowledge of your business as well the accounting software package that you are currently using or plan to use. Also ensure that that the prospective accountant has a large small business clientele. Check references from at least three current clients and also make sure that this individual is board certified to practice in the state of Georgia.

Minority Business

What is the definition of a minority-owned business?

A minority-owned business is a proprietorship, partnership, corporation or joint-venture that is 51 percent owned, operated and controlled by United States citizens who are members of the following racial groups: African American, Asian American, Hispanic American and Native American. Women-owned businesses are not minority businesses unless they fall into one of the above categories.

What is 8a Certification?

The SBA's 8(a) Business Development Program, named for a section of the Small Business Act, is a program created to help small disadvantaged businesses (SBD) compete in the American economy and access the federal procurement market. The applicant firm must be a small business, unconditionally owned and controlled by one or more socially and economically disadvantaged individuals who are of good character and citizens of the United States and must demonstrate potential for success. Eligible businesses must be in existence for 2 years and have a net worth of less than $250,000, excluding personal home.

How do I determine which certification to obtain?

Determining the correct certification depends on the government entities and private corporations that you want to do business with. Before starting any certification process, check with the organization, evaluate whether this may be a good future client, then complete and turn in the certification information in a prompt manner so that the opportunities that it creates can be realized as soon as possible.

Which documents will I need to file for certification?

Since a number of different organizations offer minority certification, document requirements can vary from organization to organization. Some commonly required documents are copies of business license, articles of incorporation, corporate by-laws, corporate and personal federal tax returns, stock certificates and board meeting minutes. The SBDC can review and assist with minority certification application.

How long does it take for my business to receive certification?

The certification process for the 8(a) business development (BD) and SDB programs are set in regulation. For the SDB program, there is a 15-day screening period and a 75-day overall processing time. For the 8(a) BD program, there is a 15-day screening period and a 90-day overall processing time.

Do I need to certify as a Woman-Owned Business and how do I obtain the certification?

You are not required to be certified as a Woman-Owned Business; however many corporations and government agencies require WBE (woman business enterprise) certification to be eligible for contracting and procurement opportunities. National Women Business Owners Corporation (NWBOC) and the Women's Business Enterprise National Council (WBENC) are the certifying organizations. Many local and state agencies may also have certification programs. For more information read the article "Get Certified and Grow Your Woman-Owned Business." For assistance in applying for certification, contact your local SBDC.