Following are some of the most frequently asked questions.
How much money do I need to invest?
There is no specific percent. Your credit history may provide part of the answer. Expect your lender to insist that you provide about 30% of the start up investment.
Can minorities get special loans or grants from the SBA?
There is no grant available. The SBA encourages lending to minorities, but all applicants are treated the same.
Why do I need a business plan?
There are several reasons. When you write a business plan you are forced to focus on all the aspects of your business. It also shows that you are serious about your business and willing to invest your time in the planning stages. A lender will require a written business plan and if the SBA is asked to guarantee the loan, a SCORE business counselor may be asked to review and ‘sign off’ on the plan.
How detailed should a business plan be?
Quality is more important than length. Brevity is appreciated, but not at the expense of completeness. A clear concise plan of five pages of text and pro-forma statements of income, balance sheet and cash flow may suffice for small start-ups.
Does the SBA lend money?
No, but it may guarantee to pay the lender a certain percent of the loan if you default.
What should I do to prepare for business ownership?
Use the services provided by SCORE. Meet with counselors in person or use the internet if a chapter is too far away. SCORE will help you ask the right questions and sharpen your focus. Use some of the business planning software which is available – see RESOURCES.
The SBA has assembled a list of questions which they hear frequently. To read more go to www.sba.gov and click on the FAQ button on the sidebar.