ZeePedia buy college essays online


Entrepreneurship

<<< Previous BANK LENDING DECISIONS:SMALL BUSINESS ADMINISTRATION LOANS Next >>>
 
img
Entrepreneurship ­ MGT602
VU
Lesson 34
BANK LENDING DECISIONS
BANK LENDING DECISIONS
1.
Banks are very cautious in lending money, particularly to new ventures.
a.
Commercial loan decisions are made only after the loan officer does a careful review of
the borrower.
b.
Decisions are made based on quantifiable and subjective judgments.
2.
Bank lending decisions can be summarized by the five C's-Character, Capacity, Capital,
Collateral, and Conditions.
a.
Past financial statements are reviewed in terms of key ratios and the entrepreneur's capital
invested.
b.
Future projections on market size, sales, and profitability are evaluated.
c.
Intuitive factors-Character and Capacity-are also taken into account and become more
important when there is little or no track record.
3.
The loan application format is generally a "mini" business plan.
a.
This provides the loan officer with information on the creditworthiness of the individual
and the ability of the venture to repay the loan.
b.
Presenting a positive business image and following procedure are important in obtaining
the funds.
4.
The entrepreneur should borrow the maximum amount possible that can be repaid, as long
as the prevailing interest rates and terms are satisfactory.
a.
Care must be taken to ensure that the venture will generate enough cash flow to repay the
interest and principal on the loan.
b.
The entrepreneur should evaluate the track record and lending policies of several banks in
the area.
SMALL BUSINESS ADMINISTRATION LOANS
A.
When an entrepreneur is unable to secure a regular commercial bank loan, an alternative is
a Small Business Administration (SBA) Guaranty Loan.
1.
The SBA guarantees that 80% of the loan will be repaid to the bank by the SBA if the
company can't pay.
2.
This allows the bank to make loans that have higher risks.
3.
This procedure is the same as for securing a bank loan, except that government forms and
documentation are required.
B.
Both long and short-term loans can be guaranteed by the SBA.
1.
A maximum loan period of 15 years on existing buildings and 20 years on new con-
struction can be obtained.
2.
For inventory, equipment, or working capital, a maximum of 10 years is available,
although five years is the usual.
3.
Once the application has been filled out, it usually is processed within 15 days.
4.
There are additional reporting requirements beyond those for a conventional bank loan.
5.
Since there is no difference in interest rates charged between conventional bank loans and
SBA-guaranteed loans, a commercial bank loan is usually better.
6.
A good banking relationship is very valuable as the venture grows.
C.
For most SBA loans, there is no limit to the amount of loan money requested, but there is
practical limit of $1 million.
1.
The vast majority of small businesses are eligible for financial assistance from the SBA.
77
img
Entrepreneurship ­ MGT602
VU
2.
As defined by the Small Business Act, a small business is independently owned and
operated and not dominant in its field of operation.
3.
The size limits of a small business vary from industry to industry.
4.
The proceeds of the loans can be used for almost any business purpose.
5.
The interest rates are negotiated between the entrepreneur and the bank, but there are subject to
SBA maximums.
78
Table of Contents:
  1. THE NATURE AND IMPORTANCE OF ENTREPRENEURSHIP:DEFINITION OF ENTREPRENEUR
  2. THE NATURE AND IMPORTANCE OF ENTREPRENEURSHIP:Possibility of New Venture Formation
  3. ENTREPRENEURIAL PROCESS/START UPS:GOVERNMENT AS AN INNOVATOR
  4. THE ENTREPRENEURIAL AND ENTREPRENEURIAL MIND:ENTREPRENEURIAL PROCESS
  5. THE ENTREPRENEURIAL AND ENTREPRENEURIAL MIND (continued…)
  6. THE ENTREPRENEURIAL AND ENTREPRENEURIAL MIND (continued…):CLIMATE FOR ENTREPRENEURSHIP
  7. THE ENTREPRENEURIAL AND ENTREPRENEURIAL MIND (continued…):PROBLEMS AND SUCCESSFUL EFFORTS
  8. THE INDIVIDUAL ENTREPRENEUR:ENTREPRENEURIAL BACKGROUND AND CHARACTERISTICS
  9. THE INDIVIDUAL ENTREPRENEUR (continued…):Personal Values, Work History, MOTIVATION
  10. THE INDIVIDUAL ENTREPRENEUR (continued…):ROLE MODELS AND SUPPORT SYSTEMS
  11. INTERNATIONAL ENTREPRENEURIAL OPPORTUNITIES:INTERNATIONAL ENTREPRENEURIAL OPPORTUNITIES, Minority interests
  12. INTERNATIONAL ENTREPRENEURIAL OPPORTUNITIES (continued…):DIRECT FOREIGN INVESTMENT
  13. INTERNATIONAL ENTREPRENEURIAL OPPORTUNITIES (continued…):BARRIERS TO INTERNATIONAL TRADE
  14. INTERNATIONAL ENTREPRENEURIAL OPPORTUNITIES (continued…):ENTREPRENEURIAL PARTNERING
  15. INTERNATIONAL ENTREPRENEURIAL OPPORTUNITIES (continued…):SOURCES OF NEW IDEAS
  16. CREATIVITY AND THE BUSINESS IDEA:METHODS OF GENERATING NEW IDEAS, CREATIVE PROBLEM SOLVING
  17. CREATIVITY AND THE BUSINESS IDEA:PRODUCT PLANNING AND DEVELOPMENT PROCESS
  18. LEGAL ISSUES FOR THE ENTREPRENEUR:NEED FOR A LAWYER, PATENTS
  19. LEGAL ISSUES FOR THE ENTREPRENEUR:TRADEMARKS, LICENSING
  20. LEGAL ISSUES FOR THE ENTREPRENEURS:PRODUCT SAFETY AND LIABILITY, INSURANCE
  21. CREATING AND STARTING THE VENTURE:WHAT IS THE BUSINESS PLAN, PRESENTING THE PLAN
  22. CREATING AND STARTING THE VENTURE (Continued….):WRITING THE BUSINESS PLAN
  23. CREATING AND STARTING THE VENTURE (Continued….):
  24. CREATING AND STARTING THE VENTURE (Continued….):WHY SOME BUSINESS PLANS FAIL, MARKETING PLAN
  25. THE MARKETING PLAN:MARKET RESEARCH FOR THE NEW VENTURE
  26. THE MARKETING MIX:STEPS IN PREPARING THE MARKETING PLAN
  27. THE ORGANIZATIONAL PLAN:DEVELOPING THE MANAGEMENT TEAM, LEGAL FORMS OF BUSINESS
  28. THE ORGANIZATIONAL PLAN (Continued….)
  29. THE ORGANIZATIONAL PLAN (Continued….):THE LIMITED LIABILITY COMPANY
  30. THE FINANCIAL PLAN:OPERATING AND CAPITAL BUDGETS
  31. THE FINANCIAL PLAN (Continued….):PRO FORMA INCOME STATEMENTS, PRO FORMA CASH FLOW
  32. PRO FORMA SOURCES AND USES OF FUNDS:PERSONAL FUNDS, FAMILY AND FRIENDS
  33. PRO FORMA SOURCES AND USES OF FUNDS:COMMERCIAL BANKS
  34. BANK LENDING DECISIONS:SMALL BUSINESS ADMINISTRATION LOANS
  35. SOURCES OF CAPITAL:GOVERNMENT GRANTS
  36. SOURCES OF CAPITAL:PRIVATE PLACEMENT, BOOTSTRAP FINANCING
  37. CAPITAL SOURCES IN PAKISTAN:PROVINCIAL LEVEL INSTITUTIONS, FINANCIAL INSTITUTIONS
  38. PREPARING FOR THE NEW VENTURE LAUNCH: EARLY MANAGEMENT DECISIONS (Continued….)
  39. PREPARING FOR THE NEW VENTURE LAUNCH: EARLY MANAGEMENT DECISIONS (Continued….)
  40. PREPARING FOR THE NEW VENTURE LAUNCH: EARLY MANAGEMENT DECISIONS (Continued….)
  41. PREPARING FOR THE NEW VENTURE LAUNCH: EARLY MANAGEMENT DECISIONS (Continued….)
  42. PREPARING FOR THE NEW VENTURE LAUNCH: EARLY MANAGEMENT DECISIONS (Continued….)
  43. NEW VENTURE EXPANSION STRATEGIES AND ISSUES:JOINT VENTURES, ACQUISITIONS
  44. NEW VENTURE EXPANSION STRATEGIES AND ISSUES (Continued….):DETERMINING THE PRICE FOR AN ACQUISITION
  45. ENTREPRENEURSHIP & PAKISTAN:GENDER DEVELOPMENT STATUS WOMAN AS AN ENTREPRENEUR IN PAKISTAN