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You got an LLC and you’re ready to hire – 3 things lenders look for

(FINANCE NEWS) Yes, securing a small business loan of any kind is tedious and depends on varying lending organizations and business needs, but there is a list of general requirements small businesses should be aware of before getting knee-deep in conflicting information about lenders.

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401k retirement fund

If you are reading this, you probably have an LLC for your small business already, or money talk gets you going. If it is the former, let me say CONGRATULATIONS, and insist you pat yourself on the back in honor of your small business’s progression. Your arrival at a point where expansion is necessary is no small feat given half of small businesses fail in the first year. So, kudos to you.

Now, back to the money talk…

For LLC businesses looking to expand, please don’t fret about all of the information you’ve seen on the web. Yes, securing a small business loan of any kind is tedious and depends on varying lending organizations and business needs, but there is a list of general requirements small businesses should be aware of before getting knee-deep in conflicting information.

After some extensive research posing as the owner of imaginary businesses and annoying every loan officer who’d take my call, I’ve found three general lending requirements. I also provide a collection of the tangible information banks will likely review to meet those requirements. Take a gander:

Assets
Small businesses must have necessary assets: steady cash flow, financial reserves, personal collateral to support a variety of business fluctuations (i.e. unexpected employee loss), and a realistic pay off plan. These assets and financial safety nets are necessary for any lending organization to be confident in your business’s ability to support employee expansion in lieu of current expenses.

Proof of past
Just as you will come to expect from your soon to be employees, lenders want proof of the past and how you’ve managed past loans to align with your business goals. Historical evidence will further determine if your expansion is feasible, but also if it is worthy for the company to accept the lending risk.

Specific plans
Finally, be prepared to provide your small business’s explicit expansion plan, including how you arrived at your suggested loan amount and how you intend to divvy out the funds. It is important that you are as specific as possible in your projected numbers, seeing as one employee could make a $60,000 difference, and largely affect your expansion plan and financial need.

Before you go…

Now that you’re equipped with the magic three, you’re probably feeling empowered to walk into your nearest bank and demand your small business loan. Let’s first be sure you have all of the necessary information on-hand and ready to produce.

Lending companies that look for the magic three before investing arrive at their conclusion after collecting data from the following pertinent information:

– Proof of collateral
– Business plan and expansion plan
– Financial details
– Current and past loan info
– Debts incurred
– Bank statements
– Tax ID
– Contact info
– Accounts receivable information
– Aging
– Sales and payment history
– Accounts payable information
– Credit references
– Financial statements
– Balance sheet
– Profit and loss history
– Copies of past tax returns
– Social Security Numbers
– Assets and liabilities details

Now, my friend, do I release you as proud as a parent unto your nearest bank to secure your small business loan and begin growing your staff the way you’ve dreamed. I’m confident you will find the aforementioned information helpful in said quest, and would like to wish one last time (because it’s impossible to over-congratulate) a sincere CONGRATULATIONS on your businesses growth.

Lauren Flanigan is a Staff Writer at The American Genius, hailing from the windy hills of Cincinnati, with a degree in Marketing from the University of Cincinnati. She has escaped the hills, and currently resides in Atlanta, where you can almost always find her camping at a Starbucks strategizing on how to take over the world.

Business Finance

Small metros may have cheaper homes, but they might not have the jobs

(BUSINESS NEWS) Study by Indeed finds that small to mid-sized metros offer higher adjusted salaries, but don’t pack your bags just yet because your job may not be there

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When I told my parents how much my partner and I would be paying for rent at our new apartment, they quickly pointed out that I could purchase a home for that kind of money in my hometown.

Indeed recently published a study where they determined which cities have the highest salaries after accounting for the cost of living, an adjusted salary. Every city on the list is a small or mid-sized metro area which is why they dubbed their findings, “the small-city advantage.” No surprise to me, my hometown made the list.

My parents are right, I could literally buy a home for the amount of money I pay in rent every month to live in a large metro area. But the equation that determines where I, and many other workers should live, is more complex than salary minus housing.

Indeed’s study also shows that bigger metros have faster job growth and lower unemployment compared to these small to mid-sized metros. This is why the number one city on their list, Brownsville-Harlingen, TX, also has a higher unemployment rate than the national average. Some of the other cities on the list are Fort Smith, AR-OK, Toledo, OH, Laredo, TX, and Rockford, IL.

These areas are cheaper to live in, in part, because they may not offer the kind of job opportunities, and therefore social mobility, you see in larger metro areas. Sure, I could make my money go further in my hometown, but the chances of me finding a job in my industry there are smaller.

Your field of work does matter when considering whether or not the “small-city advantage” could work for you. If you work in tech or finance, two traditionally high-paying fields, then this advantage doesn’t apply.

“Before adjusting for living costs, typical technology salaries are 27% higher in two-million-plus metros than metros with fewer than 250,000 people. Even after adjusting for those costs, tech salaries are still 5% higher in the largest metros than in the smallest ones,” finds Indeed.

If a huge tech company offering thousands of high-paying jobs moved into a city like Brownsville-Harlingen, TX, over time it would get more expensive to live there. This is why people were freaking out so much when Amazon was trying to decide where to locate HQ2. It’s the hamster wheel that is currently driving income inequality in some of America’s largest major metro areas.

Finding the right place to call home is never going to be a single factor decision. Yes, salary is a huge factor, as is the cost of living, but there are also lifestyle factors to consider. What kind of opportunities would you have in this city? How much will it cost to move there? How will this effect the other members of your household?

It’s nice to play the ‘ditch the corporate world and buy a country house’ fantasy after a long day at work, but the reality is far more complex.

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Business Finance

Catch is a must-have finance management app for freelancers

(BUSINESS FINANCE) Catch is a new app that allows freelancers and people without benefits to determine their best options, with great automatic features.

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Working as a freelancer is something that just meshes well with my personality. I love having the ability to take on a variety of different projects and work in different facets of the communication industry.

Unfortunately, my one semester of high school economics did not fully prepare me for the financial aspect of freelancing. Figuring out what to deduct, how to do 1099 taxes, and properly save in general was something I’ve had to learn as I go.

However, as I always say, in this day and age, there is someone out there who has a solution to your problem.

Such is the case with Catch, which is a tool that is perfect for freelancers as it helps with automated tax withholding, health insurance, and the other head-scratchers in between.

After signing up, you build a plan by using custom recommendations to get the benefits that will help you the most. Catch will tell you about the coverage you need, whether you work for yourself, a boss, or multiple bosses.

All of your benefits will be put into one place and will be ready when you are. You’ll be able to see your savings grow the more you work and use Catch. As time goes on, Catch will offer suggestions to help you prepare for the future.

From there, you can set aside money automatically. After getting paid, Catch confirms your benefits plan and will automatically put money away for taxes, time off, and retirement.

All of this helps to rid yourself of freelance financial blind spots, and Catch’s official Guide allows you to see a personal screenshot of the full benefits landscape. In addition to seeing all of your coverage at a glance, you’re also able to learn what coverage you need and why, sign up for new benefits in minutes, and easily report existing benefits.

Additionally, you’re able to see a people-centric view of your plan on the platform by adding in spouses, dependents, beneficiaries, and trusted contacts. With this information in place, you’re able to choose the plan that works best for you; allowing you to edit as needed, check savings instantly, and view full paycheck and contribution history.

And as your life evolves, Catch is there to help with the transition. The platform offers recommendations for how benefits and coverage can change with things like: job relocation, getting married, starting a family, or starting a new job.

As Catch says, it’s “peace of mind at the palm of your hand.” This is definitely something for freelancers to consider as part of their financial strategy.

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Business Finance

6 questions to ask when considering a startup accelerator

(BUSINESS FINANCE) Accelerators can help change startups from unknowns to leaders in the industry, but does your startup need one and if so which one?

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When I’m advising startups, I often hear the question: “which accelerator is the best fit for me?” (Besides the obvious YC or Techstars.)

First off, I’ll ask if your company would benefit from an accelerator, or if you need to pursue something for early early stage companies before you achieve more market validation, like an incubator. (Side note: If you’re curious about incubators, here is a comparison of the two.)

If you’re new to these terms, here’s a brief recap on startup accelerators:

Startup accelerators are for companies with established co-founders and market validation – companies can be anywhere from pre-revenue/self-funded, or even have raised at least $1M.

Most programs can last anywhere from 10 weeks to 3-4 months. With many top accelerators like YC and Techstars, you’ll be expected to move to the city where it’s hosted and spend 40+ hours a week minimum in their dedicated coworking space, and several accelerators will often offer housing stipends to make the move easier. These programs typically conclude with a demo day to pitch your product to a variety of community leaders, angel, and institutional investors.

If your product has achieved market validation and is in a place where you’re ready to scale, congrats!

Before you commit to an accelerator, ask yourself and the program these six questions:

1. What kind of mentorship is available?

By and large, one of the most valuable portions of an accelerator is the networking with peers and mentors. Ask what kind of mentors are available to you as a part of a program, and ask their specific involvement and the opportunities to connect. These mentors will be crucial in guiding your company’s growth. Even if they aren’t in the same industry or have solved a similar problem that your company is trying to achieve, their advice and connections could prove to be invaluable.

2. What are the perks?

You’re giving up a lot of equity to be in a program, but it doesn’t come without its perks. Many programs offer not only a cash investment or stipend for housing or other growth costs, but programs like Techstars offer free services such as web hosting costs (an upwards of ~250k), legal and accounting services, and other credits and perks that can be worth 6-7 figures. Make sure you know what you’re getting before you say yes to a program.

3. Do I want an industry-specific or industry-agnostic program?

This one is important and is directly related to #2. If your company sells CPG products, web hosting credits may not be valuable to your business, but a CPG-specific accelerator like SKU or The Brandery with direct connections to Sephora, Target, and Whole Foods may make more sense.

4. How much equity am I willing to give up?

Try not to make this a guessing game and make as many data-driven decisions on this as you can. Create a revenue and valuation model and see how much your company would benefit from the networking, fundraising opportunities, and perks offered, and see what the ROI would potentially be.

5. What are the funding and exit numbers?

This is an objective way to view the success of an accelerator: # of funding raised and exits. Of course, younger accelerators will have smaller numbers, but it’s worth looking to see if a company has raised $ after. Seed-DB is a great resource to view these numbers for hundreds of accelerators globally.

6. What do alumni think?

All accelerators are going to tout the transformative experience that is their program, and program mentors will likely have a similar narrative.

The best resource to learn the real experience of an accelerator: ask its alumni, and they’ll give you the truth. Make sure to survey both recent and more experienced alumni, as they’ll be able to speak to both the short term and long term benefits.

Personal experience: the night before I was set to hear from an accelerator on my application status, two alumni stressed to me that the time and equity investment wasn’t worth it. I consider this providence!

Finally, two items to note:

Choosing an accelerator is all about finding the right fit between you and the organization. Sadly, not all accelerators are created equal, and try to view a potential relationship with an accelerator as an investor relationship, or better yet, dating. There’s a reason the phrase “no money is better than bad money” is prevalent in the startup community.

Make sure to do your due diligence and ask the right questions to make sure a specific program is worth the investment of time, energy, and equity.

And sometimes? That may not mean an accelerator is a right fit right now or at any point, and that’s okay.

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