By Kevin Chu, Loan Program Manager, Greater Newark Enterprises Corporation (GNEC)
You have the passion, the drive and vision, the creative and innovative food product or service, and you’ve detailed everything into a comprehensive business plan. Now you just need one thing: the money. Funding your dream isn’t always easy. You’ve already made plans to tap your savings, max out your credit cards, even dip into your retirement plan and ask family and friends for investments. But maybe a bank loan can help fund your entrepreneurial dreams, too.
Following are the top 10 things you need to have on hand to apply for a loan if you are a start-up or new food business:
1. Business Plan. This is the most important document. It is your road map, your vision, your food entrepreneurship life all in one piece. Be sure it includes detailed information about the industry, a SWOT analysis, explanation about your management and/or advisory committee, product pricing, feasibility, marketing tactics, and assumptions.
2. Cash Flow Projection Analysis (2-3 Years). You will need to present your cash flow projections and an analysis of how this information determined. Your first year should be a monthly projection. Be sure to include details for all assumptions.
3. Start-up Budget. Do you know how much it will take to open and operate your business? How much will you contribute and how much will be raised? Provide a detailed breakdown on income and expenses as part of your start-up budget. Add a little more for contingencies.
4. Credit Report. Your credit report helps banks determine their risk in lending you money. When you are a start-up, your personal finances illustrate your fiscal responsibility. Be sure to address any negative or inaccurate information before approaching the bank.
5. Identification of Collateral. Most lending institutions will require collateral for a business loan. You must provide a list of personal and business assets (such as property and equipment) Include the year, model and approximate value, if applicable.
6. Personal Financial Statement. Along with your credit report, the bank will want to see if you have personal accounts upon which to draw to fund a business and/or payback a loan. Be sure to include your financial statements, four months of personal bank statements and three years of tax returns.
7. Statement of Capacity. Banks want to be sure you can repay the loan, following the appropriate terms. Be ready to provide the bank evidence of your cash flow. This includes your two most recent pay stubs (if employed); proof of other income if no longer employed; signed contracts and/or purchase orders for the business indicating future orders.
8. Risk Management Statement. To demonstrate that you have the ability to define, recognize and account for risk within your business, provide a statement clearly detailing those risks.
9. Identification of Place of Operation. The bank will want to know from where you are operating your business. Include rental agreements if you are leasing a space, or provide mortgage documentation and ownership paperwork if that applies. Also, include proof that your business meets and adheres to all local zoning and occupancy regulations.
10. Business Registration Operating Agreement (if applicable). Ensure the bank has proof that you hold up-to-date state and local licenses and permits required to do business in your city, county and/or state..
Following are the top 10 things you need to have on hand to apply for a loan if you are an established food business:
1. Expansion Plan. Growth is the primary reason to request a loan from a bank. If this is your reason, provide detail of your expansion plan and include the time frame. Also, detail your management team’s experience to demonstrate that you have the capacity to handle the growth.
2. Cash Flow Projection. Show the bank you are planning ahead by providing your cash flow projection for the next 2-3 years.
3. Project Budget. Itemize your project to detail how you plan to spend the loan money.
4. Credit Reports. You will need to provide personal and business credit reports. Be sure to address any negative or inaccurate information prior to applying for a loan.
5. Identification of Collateral. List your personal and business assets. Provide a detailed list of personal assets such as your home(s), vehicle(s), and valuables and business assets such as equipment and property. Be sure to clearly identify and describe the assets and attach an estimated value.
6. Financial Statements. Provide your personal and business financial statements, including four months of personal bank statements and three years of personal tax returns, along with your business profit and loss (P&L) statement and balance sheet, three years of business tax returns and business bank statements.
7. Business Debt Schedule. The bank will want information about your account receivables and payables. This includes signed contracts and purchase orders for future orders.
8. Risk Management Statement. To demonstrate that you have the ability to define, recognize and account for risk within your business, provide a statement detailing as such.
9. Identification of Place of Operation. The bank will want to know from where you are operating your business. Include a fully executed rental agreement if you are leasing a space, or provide mortgage documentation and ownership paperwork if that applies. The term of the business loan may be tied to the term of the lease, so be sure to include any options/extensions. Also, include proof that your business meets and adheres to all local zoning and occupancy regulations.
10.Business Registration Operating Agreement (if applicable). Ensure the bank has proof that you hold up-to-date state and local licenses and permits required to do business in your city, county and/or state.
Greater Newark Enterprises Corporation (GNEC) is a non-profit organization and Community Development Financing Institution (CDFI) committed to business growth and job creation. GNEC accomplishes this mission by connecting entrepreneurs to business and capital resources. For more information on their services, visit. www.gnecorp.org.