SCORE FREQUENTLY ASKED QUESTIONS
Often asked questions by those wanting to start or grow a business. Questions about grants, business plans, lawyers, accountants and more.
Why is a Business Plan Necessary?
A well-written business plan is a requirement of any lending institution that you may contact for a loan. Even if you don’t need a loan, you should prepare a good business plan. This will require you to put a great deal of thought as to the risks and benefits of proceeding. It will generate a lot of questions that you may not consider without this effort. A business plan is the foundation of good business.
Where and How Do I Get The Money Needed to Finance My New Business?
First, you need to provide a written business plan with supporting financial documents. Most small business loans are made through banks, including those guaranteed by the SBA. Friends, relatives and venture capital can be sources of loans. See the Economic Development Director in your community. Your town or county may offer special loans in your area.
Are There Any Grants or Free Funds For A Start-up Business?
Generally speaking, there are no grants or free money. There may be some exceptions when nonprofit organizations and businesses are involved in seeking charitable grants. But if you’re in business to earn a profit, prepare a business plan and bring your own capital combines with borrowed funds to fuel the business. Loans have terms and repayment schedules. Be sure the interest rates and terms are competitive within your market.
How Much of My Own Money Will I Need to Invest in Order to Obtain a Loan?
When applying for a loan, the percentage of your own capital that the lender will expect you to invest will vary from 20 to 30 percent, sometimes more. A retail or service business will usually require a lower percentage, while a food or liquor related business will often demand the highest commitment of personal funds. And, a lender will expect you to provide collateral to cover the amount of the loan.
How Should I Structure My Business?
Probably most new businesses should organize as a sole proprietorship because of its simplicity and low initial cost. (Today LLCs may be a more common alternative.) Review your business plan with a SCORE business counselor to discuss various business structures and determine what suits your business. If more than one individual will own the business, a business attorney and accountant should be consulted from the very beginning stages of business planning, so necessary legal documents are prepared and filed for your partnership or corporation.
How Do I Find an Attorney or an Accountant?
The referral services of county and state bar associations can help you locate an attorney. Contact business colleagues who have worked with attorneys and accountants. Obtain recommendations and interview your short list of candidates. Treat this with great care, so you make the most informed decision about getting a skilled professional that is suited to your business needs. Meet for a consultation interview to find out what services are provided and how you will be billed. Usually, this initial consultation is provided at no charge to you.
What Tax Number and Licenses Are Required to Operate My Business?
Most SCORE offices have a list of names and addresses of the various city, county, state and federal offices you will need to contact for licenses, registration and fees. Most counties, cities and towns require registration of your business with the clerk of that governing body. Depending on your business, certain state permits may also be required. To obtain a state sales tax number, you ill need to contact the nearest state sales tax bureau. They will provide specific instructions and all the forms required to apply for the number. If you need a Federal Tax ID number, necessary if you have employees, check with the IRS.
Is It Better to Buy A Building for My New Business or Lease the Required Space?
Probably, nine out of ten times, we advise clients to lease space instead of buying or building. This is simply because most new businesses do not have the capital to buy or build offices at the beginning of the business venture. Furthermore, it is often better to lease in order to free up cash for business operations and avoid assuming a large loan of this type at the opening of business operations.
I’m Having Difficulty Making Cash Flow Projections. Is There an Easy Way?
Unfortunately, there is no easy way to prepare a cash flow statement. You simply have to invest the time and effort necessary to research all the numbers before applying them to your statement. Think of the cash flow statement as your projected checkbook. That is, on your cash flow statement as “cash in” enter your estimated deposits that you expect to post to your checkbook register. On this statement as “cash out” enter checks you expect to write and post to your checkbook register. Having a computer program available to calculate all of the numbers will help save time and add efficiency; however, you must invest the time up front by projecting realistic in come and expense numbers.
What Do I Need to Know About Marketing and Advertising My Business?
You need to know that it is absolutely critical to market and promote your business from day one. In the early planning stages for your business, take time to research information about your target market, local economy and the demographic appeal of your project or service. Find out who your competitors are and find out their strengths and weaknesses. The only way you can distinguish your company is to have an understanding of other offerings on the market.