Question

NO HANDWRITTEN ANSWERS PLEASE

A-Your friend has tried to get a traditional loan but can’t because he has a low asset base and is considered a high risk. Your friend needs money quickly but the bank process takes forever. What advice will you give him? B-Examine why an entrepreneur would need financing and the three basic ways to obtain financing.C-What must businesses do in order to be eligible for financial assistance from the SBA?

Answer 1

a. Even if the friend cannot obtain a business loan, I would advice him or her to obtain financing through alternatives means such as payday loans and loan from a micro credit lender

1. Payday loans: It is a small, short-term unsecured loan. It does not need a credit report. So, those who have a low credit score can take it. The friend can resort to this despite being considered a high risk. But it is only for a short period and for small amounts.
2. Micro Credit Loan: Micro credit lenders are much flexible than banks. They have disbursed loans to those with a low credit score and lacking collateral.

b.Reasons why an entrepreneur need financing:

1. Staring the business: An entrepreneur will need cash to start a business, by buying machinery, land for constructing an office, paying employees and paying for working capital needs.
2. Developing and marketing: An entrepreneur would require financing for developing and marketing of its products,
3. Moving to new location: Cash would be needed to move into new premises and installing machinery.
4. Running expenses: An entrepreneur would need funding to pay for day to day running expenses such as buying raw materials, paying for electricity and wages.

Ways to obtain financing:

1. Obtaining a bank loan.
2. Tapping into 401(k): An entrepreneur can tap into his or her 401(k) funds to obtain financing.
3. Angel investor: Funding can be obtained by approaching an angle investor and pitching your business idea.
4. Obtaining SBA loan.
5. Securing a micro loan. They are small business loans ranging from $500 to $35,000.

c.Eligibility fro financial assistance from the SBA:

1. It requires a credit score more than 680.
2. There shouldn’t have been any recent bankruptcies, foreclosures or tax liens.
3. Collateral backing for the loan.
4. A down payment of 10% if the loan is required to purchase a business, commercial real estate or equipment.
5. Developing a business plan detailing the product or service, management team, operations plan and sales and marketing strategy.
6. Business must operate fro profit.
7. Must have operations in USA.
8. Must be in operation for at least 2 years.

I hope that was helpful :)