Transcript Cash Flow Basics - Alliance For Biz

Finding Financing in
Today’s Economy
Courtney Lipscomb,
Business Banking Officer
SunTrust Bank
Live Solid. Bank Solid.
Loan Types & Revenue
Streams
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Commercial Mortgages
Lines of Credit
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Equity Lines of Credit
Unsecured Lending?
Equipment & Term
Loans
Church Lending
SBA Mortgages & Lines
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Refi/Cash Out, New
Purchase,
Construction, Land
Are you paying more
for leasing?
Establish ownership
Tax Benefits
Investment Property
The Soft Skills
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Why are you going into business?
What does your product or service seek to
accomplish?
Where is your data?
First Impressions
Loan Package Components
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Application & Personal Guaranty
Personal Financial Statement
Schedule of Business Debt
Min. Past 2 years Personal & Business Tax Returns
2 months Bank Statements
4506-T Form for SSN# & TIN#
Past 2 years Income Statement & Balance Sheet
Business Plan & Pro Forma Statements (start-ups)
Organizing Paperwork & Agreements
Operating Bank Account
Historically Speaking, Not Just
Your Score
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SBFE-Small Business Financial Exchange,
managed by Equifax
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FICO Beacon Score-Consumer Accounts
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Predicts the likelihood of a small business
account incurring 90+ days severe delinquency,
charge off, or bankruptcy in the next 12 months
Mid-High 500’s
High 600’s
Payment History, regardless of Score
Understanding Underwriting
Character
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Banks only have credit reports to rely on to
determine character.
How you’ve paid others is the only true gauge a
bank has on how you’ll repay them.
Take appropriate steps to keep your credit in good
standing.
The Truth- Banks can see your entire history. Paying
on time is as important as your score.
Understanding Cash Flow
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Banks are Cash Flow Lenders
Profit – To report or not to report? How
informed is your CPA?
GDSC – Global Debt Service Coverage is
one ratio banks use to determine cash flow
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Global = Personal income & expense + Business
income & expense
See example on next slide
Understanding Cash Flow
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GDSC = Annual Income / Annualized Debt
$60,000 / $29,500 = 2.03
This means for every $1.00 of debt, there is
$2.03 to cover it.
Banks generally require a ratio of:
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1.25 (Start ups)
1.35 -1.40 (Conventional)
1.00 (SBA, Non Start Ups)
1.00-1.10 (Churches)
Understanding Underwriting
Capacity
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Does the business have the revenue and
cash flow to support both new and old debt?
Is there a secondary source of repayment?
What is it & where is it?
Revenue Streams Cont.
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______ %_____
______ %_____
______ %_____
=100%
Avg unit price x # sold= revenue per stream
Avg unit price x # sold= revenue per stream
Avg unit price x # sold= revenue per stream
_______________
$ Total Revenue next year
Positive Cash Flow?
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Do you have a partner, family member, angel
investor to become a co-guarantor on the
loan?
Have you used the savings calculators on
www.bankrate.com?
Are you eligible for grants, etc?
How much stimulus money was awarded to
your county? Have you tapped into those
resources?
Understanding Underwriting
The 4 C’s of Credit
 Cash
 Collateral
 Character
 Capacity
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The Bank’s Litmus Test to understand your
ability to repay the loan if the business can
not
Understanding Underwriting
cont.
Cash
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Do not expect the bank to finance 100% of
your business.
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Where is your 10-15% down payment?
Bank 50%,SBA 40%, You 10%
Only cash FLOW repays loans
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Not Bank Accounts
Understanding Underwriting
cont.
Collateral
Banks rarely lend on an unsecured basis
Acceptable forms of collateral are:
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4.
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Real Estate- Proof of Hazard Insurance
Accounts Receivable / Inventory
Machinery/Equipment-Vin #, Bill of Sale
CDs
Restrictions vary per bank & loan type
regarding percentages they will finance
(LTV)
Show Initiative & Get Your
Loan
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Educate yourself & get relevant experience
Get professional help in organizing, managing &
running your business to minimize costs
Research lowest merchant service rates
Research low cost payroll services
Collect payment faster with ACH
Fraud Protection
Pay attention to your personal and business cash
flow
Address any issues on credit report Upfront
Have up to date, accurate, and realistic documents
Show Initiative- Reduce
Expenses; Increase Profit
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Ability to collect Payment wherever, whenever?
SunTrust Lowest Rate Guaranteed & Free
Equipment!
SunTrust Full Service Payroll @ $35/month-Period!
Free accounts, wires (depending on industry), ability
to transfer money from business to personal online
Free Fraud Inspector (some accounts)
Ability to Deposit Money from your Desk until 8:30
PM
Dedicated Business Banking Team
Things To Consider
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High Risk, Ineligible Industry?
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Stimulus Package
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Real Estate Developer, Financier, Agriculture
SBA Loan Fees Waived!
Low Prime Rate
New SunTrust SBA Export Lending Available 3rd Quarter!
Is your Business sustainable in the new green
economy?
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What/ how will environmental regulations impact you?
Show Initiative!
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Let’s Work Together & Show Yourself the
Money!
Question & Answer
Courtney Lipscomb
SunTrust Business
Banking
404-624-4254