Business Frequently Asked Questions

A business plan defines your business, identifies your goals and serves as your firm's resume. Its basic components include a current and pro forma balance sheet and income statement and a cash flow analysis. It helps you allocate resources properly, handle unforeseen complications and make the right decisions. Because it provides specific and organized information about your company and how you will repay your loan or line of credit, a good business plan is a crucial part of any loan package. It can tell your sales personnel, suppliers and others about your operations and goals.

As you begin the process of starting your own business you need to know what licenses are required, zoning laws and other regulations pertaining to your company. The Small Business Administration (SBA) office and/or Chamber of Commerce will provide you with general information, but you'll need to consult your attorney for advice specific to your enterprise and area.

Here are the building blocks for building a successful small business ...

• Sound management practices.
• Industry experience.
• Technical support.
• Planning ability.

A business partner doesn't guarantee success. However, if you require additional management skills or start-up capital, engaging a partner may be your best decision.

Wage levels are calculated by determining the importance of a job position and the skill required. Consult your trade association and accountant to learn the most current practices, cost ratios and profit margins in your business field. While there is a minimum wage set by federal law for most jobs, the actual wage paid is entirely between you and your employee.

Once you've taken care of your building and equipment needs you need enough money to cover operating expenses for at least a year. These expenses include your salary as the owner and money to repay your loans.

Committing your own funds is generally the first step. It's the best indicator of how serious you are about your business. Trade credit, selling stock and equipment leasing are often used as alternatives to borrowing. Leasing can be an advantage simply because it doesn't tie up your cash. Your credit union is an obvious source of funds.

Initially, the lender will ask three questions:

• How will you use the loan?
• How much do you need to borrow?
• How will you repay the loan?

When you apply for the loan, you'll be asked to provide projected financial statements and a cohesive and a clear business plan. Your business plan will include the name of your company, location, production facilities, legal structure and business goals. A clear description of your experience and management capabilities, as well as the expertise of other key personnel, will also be needed.

The importance of keeping adequate records can't be stressed enough. Without records, it will be impossible to determine how well your business is doing and where it's going. Records are needed to substantiate:

• Your tax returns under Federal and State laws, including income tax and Social Security laws;
• Your request for credit from vendors or a loan from your credit union;
• Your claims about the business, should you wish to sell it.
• Most importantly, you need them to run your business successfully and increase your profits.

You should prepare and have a solid grasp of these two basic financial statements:

• the balance sheet, which is a record of assets, liabilities and capital; and
• the income statement, a summary of your earnings and expenses over a given period of time.

Marketing is your most important organizing tool. Here are the 4 Ps of marketing your business.

• Product: The item or service you sell.
• Price: The amount you charge for your product or service.
• Promote: The ways you inform your market as to who, what and where you are.
• Provide: The channels you used to take the product to the customer.

On the positive side leasing doesn’t tie up your cash. The disadvantage of leasing – there is no resale or salvage value because you don’t own the building or equipment.

You’ve done your homework; completed your business plan; know where you want to operate; how much cash you’ll need; and have specific information on employee, vendor and market possibilities. You’ll want someone to look over your plans objectively. A SCORE representative and/or the Small Business Development Center can also review your work and help with the fine tuning. SCORE Counselor's to America's Small Business

A borrower's capital contribution generally must be 20% cash injection.

Click here to inquire about a Business Loan. If you have any questions, contact one of our business services professionals at 1-915-778-9221, toll-free at 1-800-772-4328.

Depending on the type of license you need, your state and local government provide business licenses.