Small Business Administration loans info and help needed.(A rare Vanity)

vanity | 1-26-06 | freedom4ever

[freedom4ever]

I am wondering if there are any Freepers who ever used the Small Business Administration loan program for starting a small business. Specifically, the 7A loan program, since this is what my son is looking at for starting a body shop and a custom auto shop. He is 21 yrs. old and has an excellent credit rating and the desire to open his own shop. We have found a nice building for the shop. He has started through the process of applying, i.e. getting info packets and talking to his banker and getting info from the SCORE people.

I am curious about the success you(Freepers) may have had with the SBA program and also the drawbacks? Has anyone from Indiana ever used any state programs for getting money for a small business. I wonder about any personal experiences from any one on here?

I also wonder if there is any other sources of funding for small businesses besides the bank and small business administration for this type of business. Thanks to all for your help.

[neodad]

Refinancing an SBA loan with CIT financial right now. Our regional rep is elizabeth.pulido@cit.com. She could put you in touch with the loan officer in your area. We've been very satisfied with them.

[freedom4ever]

Interesting. My son has a banker who is being very helpful, but I will keep this in mind.

[neodad]

Overall, we've been very happy with the SBA.

[Red Badger]

Vanities aren't rare, There must be at least 20 of 'em a day here!.......

[tgambill]

business plan, business plan.....they really get on that. I used Business Plan Pro or Premier whichever is most appropriate. They also provide 500 sample plans that are already done. I got my MBA through the University of Phoenix and they require the purchase of the program through paloalto. If you are interested, I can give you links....

http://www.paloalto.com/ps/bp/features/New_Features_for_2006.cfm

Good program......

Tom

[freedom4ever]

Rare for me.

[freedom4ever]

We are going to work on the business plan this weekend. I'll look at the link.

[Red Badger]

You're obviously not trying hard enough!..........

[Jeff Chandler]

I would be concerned with more basic business issues before worrying about loans to open a shop.

Has he done any market research to determine how much demand there is in the area and how much competition he'll have? How much of his own capital does he have to carry him through the first couple years? What are his personal expenses outside of the business?

On a more personal level, is he a self-starter, or does he perform better when given tasks to do by a supervisor? How much experience does he have in the industry, managing a business, etc.? If he has never managed a body shop, I would highly recommend doing so for a while before opening his own.

If he hasn't done so already, he should take a small business course at the local community college.

These are the kind of questions which can make or break a business.

That being said, good luck to him in his endeavor.

[groanup]

SBA lenders make their money by packaging and selling the loans to third party investors. Try to find a non-bank type of lender who may be more aggressive and much more open to coaching your son through the process. In fact, try to find a few of them.

[JerseyHighlander]

First off, congrats to your son.

I suggest trying to contact a CDC or SBIC lender, I don't know where you are located in Indiana, so here is a link of every lender in your state.

http://www.sba.gov/in/financing.html

Go to the link "CERTIFIED DEVELOPMENT COMPANIES" and link " SMALL BUSINESS INVESTMENT COMPANIES" to get the complete list of CDCs and SBICs in your state.

You might have found this website already, but if not, read through this carefully:

http://www.sba.gov/financing/

As stated in a previous response, business plans, 5 year pro forma, 5 year previous (this will be the biggest hurdle for your son), collateral, and company and personal credit histories are key to getting a loan.

Use Business Plan Pro to set up his business plan.

You should have a regional SBA, CDC, or state or county level business resource center somewhere near you, be it in a government building, local community college etc, and they should have all the literature, and a staf on hand to help you get another perspective outside of your lenders. MOST people who get SBA loans do NOT avail themselves of these services, and it's to the borrower's disadvantage.



Here are some quick links i found for you

http://www.emichigancity.com/busdevelop/busresources/

Here's the state of Indiana Economic Development Corp

http://www.in.gov/iedc/starting/

List of CDC's in Indiana:

http://www.buzgate.org/in/bfh_economic.html


Hope it helps. I have a family member who works for 2 CDC's and a SBIC, and has done more &A loans than I know about. If you have any more questions, please ask.

[JerseyHighlander]

As a borrower from the SBA it is not of your concern where your paper ends up, the SBA insures the paper up to 70%, it's how SBA 7A loans can be had at below prime for borrowers.

[groanup]

I didn't say it was. Re read my post. I know smaller lenders can be more aggressive and therefore he may have a better time than going to a big bank, only a few of which are big SBA lenders.

[JerseyHighlander]

Right then, I reread your post, you are dead on. I'll keep my caveat, that the borrower doesn't need concern himself where the paper ends up.

[freedom4ever]

Thanks so much for the help. I am in Southwest Indiana and he has been talking to the credit unionloan officer where he has his savings and checking. He has 2 years of college and a couple of years working in the business. He has a few people wanting to have him do work for him. He does have a good reputation.

As far as market research, we live in the community so we pretty well know what is around here. There are 3 body shops and two dealers with shops in the county. They are on the west side of the county and this business would be on the east side, so we think he would have a lock on a lot of good business. It is on a major 2 lane highway so he has a lot of exposure. I will look at the links you all have provided.

[groanup]

You know, the more I think about your son the more I wonder why he wants to get in debt. The body shop business is always going to be in demand. He needs:

1. A place to work.

2. Tools.

3. An accounting service.

4. An assistant.

5. What else?

I don't know how it is in Indiana but in Atlanta there are certain parts of town that have body shops, repair shops, etc.

It looks to me like most business is walk in and not loyalty. After all, how often does anyone need non-dealer body work in their lifetimes?

Unless he is going to seek some specialty business like UPS fleet trucks it seems to me that he needs to go as cheap as he can and hang out a sign.

But then again I am not in that business so my advice should be taken with a big grain of salt.

[groanup]

Another thing and I'll shut up. I once bought a newspaper with my partner in the securities business. We thought we were so smart. But in our minds we bought the whole business and when some unknown entity came around looking for payment of some debt we thought we had an obligation to consider payment. WRONG!!

When you buy a business you must be sure you only buy the assets. Leave the liabilities to someone else if you can.

Don't borrow money if you can help it. Good luck.

[JerseyHighlander]

hope it helps. I'd suggest getting your son on his way to a course to train for ASE cert before you hangs his own shingle out front. Until he is ASE certified, and until he jumps through certain hoops for insurance companies to become certified with the insurance companies, your son should think about trying to work for someone else to avoid the large debt load. (He might be already, which if he is at 21, is a clear reason to start his own shop already). Has your son dealt with enough auto insurance adjusters to know all the hoops? Does he know the local insurance adjusters already? Who controls the local towing contracts, does that tower have a in house body shop, or a guy he refers people out to?

At 21 your son could do a few more years of working for someone, someone who pays all the p&c insurance and health insurance costs, and build up more capital towards this endeavour.

Best of luck.

[politicket]

IMHO...21 is way too young to incur that debt load.

I have been self-employed for many years and my advice to anyone who asks is to start small and build your business. This means no loans and working a regular job to make ends meet.

If your son needs to do his startup business during the "normal" workday then he should find a solid job working 2nd or 3rd shift.

He's got lots of time to build a business. He doesn't need to risk a loan default.