Question I had a couple of questions on starting a small business. First do i need a license? How do I get a small business loan? If you could please answer and e-mail me back thank you for your time
Lauren Brunzell
Answer Dear Lauren:
The following are steps that you must take when starting new business:
1) Choose your Business Name
2) Create Business Plan
3) Choose Business Structure and register your company
The following table will help you to make a decision about business structure: http://www.blquest.biz/business_structure.htm
DBA is the cheapest one. But it is the worst way to save money. In taxes and liabilities you will pay more down the road. Partnership is another disastrous option. Chose between LLC or Corporation. For the physical store I will go with Corporation.
5) Establish your business:
•Obtain all necessary licenses - contact your local officials: The Secretary of State must have information what license is required for your business in your state or your town.
•Open physical location for your business. The best approach is to find a good commercial realtor. The realtor will help you negotiate the best lease possible. And can also suggest the best place to open the store.
•Order business phone lines, fax line, 800 numbers and other communication tools
•Order business website and e-mail
•Open business account with your bank. Try to have an average daily balance of at least $1,000
•Establish trade references. You can start with the business credit cards.
6) Apply for Identity Theft Protection with PPL. Having business without affordable legal assistance is an expansive option.
7) Enroll your business in Better Business Bureau after 6 months of existence.
How to apply for a small business loan.
Create a business plan. It must include projections for at least 2 years.
Make sure you have 20% - 30% down payment
Make sure you have collateral. The following is the formula to calculate collateral:
Collateral = (Personal Real estate value*0.8 – Mortgage) + Commercial Real Estate Value * 0.8 + Equipment value *0.5 + Inventory *0.1
Make sure your credit score is 680+. Pre-Paid legal service – Identity Theft protection (see sources below) will not only send you credit report but will also clean it in case of identity theft.
Make sure you have relevant experience. Banks will never finance career change.
Collect all necessary financial documents:
1) Personal tax returns for the last 3 years
2) Business tax returns (for existing business) for the last 3 years
3) Profit And Loss statement year to date
Find local bank that will finance your business type (VERY IMPORTANT). Call first and discuss your needs in details.
Complete loan application – make sure there is no arithmetical errors, mistyping and all personal financial information is correct.
Submit the complete package – all documents that were requested by the loan office to the bank.
