How much money do I need to get started?

      One of the leading causes of business failure is insufficient start-up capital; therefore it is important to accurately estimate your cash flow needs. After the start-up costs that will be incurred (eg. building and equipment needs) are calculated, it is critical to have enough working capital to cover operating expenses for at least a year. These expenses can include your salary as the owner, money to repay your loans, employees and other monthly business expenses.

Are there any business grants available to start a business?

      Grants are rare and are not a typical source of funding for start-up businesses. They do not have to be repaid, and they do not require ownership of an asset. An exception may be for a high technology type business or for businesses producing products that can be used by certain agencies or departments involved in our nation's defense.

What are the alternatives in financing a business?

      The first financing step is committing your own funds. It is the best indicator of how serious you are about your business. Risking your own money gives confidence for others to invest in your business.

• Family and Friends may also help.
• Having a partner for additional financing may be something you might want to consider.
• Banks are a source of funds.
• Other loan sources include commercial finance companies, venture capital firms, local development companies.
• Alternatives to borrowing further include trade credit, selling stock and equipment leasing.

What do I have to do to get a loan?

      Attaining a loan depends on many factors including length of time in business, financial condition, credit history, collateral and amount requested. Be prepared with the answers for these questions:

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

      When you apply for the loan, you must provide historical and/ or projected financial statements as part of a cohesive, clear business plan which also supplies the name of the firm, 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.

What will a lender need to process my business loan application?

• A business plan
• Cash flow projections
• Personal income tax returns

      ** If buying an existing business, provide tax returns for the current business for 2-3 years**
      Personal financial statement.

What is equity and do I need it?

      Equity is an accounting term used to describe the net investment of the owners in a business. As a general rule, financing resources will expect the business owners to have a minimum of 20% of the total funds required to start a new business or to acquire business assets such as equipment in lieu of cash.

What is collateral?

      Collateral is something of value, such as real estate or equipment that you use to secure a loan. If you do not repay the loan, the lender can legally take and sell the collateral to cover what you owe. Collateral will also include any business assets including real estate, machinery and equipment, accounts receivable being acquired with the borrowed funds.

Are there loans for women-owned businesses? For minority-owned businesses?

      The Pennsylvania Minority Business Development authority (PMBDA) provides low-interest financing to businesses owned and operated by minorities. The federal government does not offer any guaranteed loans specifically for women or minorities. However, through the Women and Minorities Pre-Qualification Loan Program, the SBA pre-qualifies women and minority business owners in certain regions of the U.S. for loans of up to $250,000 before they even apply to a lender. The program focuses on the character, credit, experience and reliability of an applicant, not just their collateral. For more information on the SBA’s Office of Women’s Business Ownership please visit www.sba.gov.

Where can I get my credit report?

      To obtain your credit report, you can write to these three main reporting agencies:

      Equifax: 1-800-685-1111

      P.O. Box 740241 , Atlanta, GA 30374-0241

      www.equifax.com

      Experian (formerly TRW): 1-800-311-4769

      P.O. Box 2002 , Allen, TX 75013

      www.experian.com

      TransUnion: 1-800-888-4213

      P.O. Box 1000 , Chester, PA 19022

      www.transunion.com

When can I get a free copy of my credit report?

      You are entitled to a free copy of your credit report once every twelve months from a central website created by the three nationwide consumer credit report companies, Equifax, Experian and TransUnion. To review your credit report visit www.annualcreditreport.com.

How do I correct errors on my credit report?

      Credit reports are gathered from many sources, so it is very easy for a mistake to be entered onto your report- such as an outstanding payment that has been settled. To fix a mistake, first send a letter to the store or the company that provided the credit bureau with the incorrect information. Also send a copy of this letter to the credit bureau, letting them know of the error. Many credit bureaus offer a Dispute Form that makes fixing a mistake easy.

What can I do to repair my credit?

• Figure out where you stand and devise a plan - determine your net worth and begin to pay at least your minimum payment for each bill on time.
• Negotiate with creditors – see if it is possible to negotiate a payment plan that is more realistic.
• Add pertinent information to your credit file – this can include information on loans that have been paid on schedule, salary increases at your job, settlement of disputed bills etc.

What is a credit score?

      A credit score is a point system that lenders use to estimate risk. Points are added up in different categories like 'past payment history' and 'amount presently owed'. The higher the overall score in the various categories, the better the chance is of getting a loan. Historically, borrowers with higher scores are less likely to default on a loan.

Which parts of a credit history are most important?

      Banks and lenders look at a series of criteria to determine your credit score and to see if you qualify for a loan.

• Your Payment History - the more bills paid on time, the higher your score.
  Amounts You Owe - this includes the lines of credit and credit cards currently held, number of loans outstanding, length of time they have been open and amount owed on each.
• Length of Your Credit History - the longer you have successfully managed your credit, the better.
• Types of Credit Used - credit cards may count against you while a mortgage may be favorable as it shows a serious commitment to meeting financial obligations.
• New Credit - Lenders will also look to see how much credit you have requested and received in the past.

What's an acceptable score?

Credit scores (usually) range from 340 to 820. The higher your score, the less risk a lender believes you will be. As your score climbs, the interest rate you are offered will probably decline.