Finding Money

How do I know how much money I need?

• Monetary needs are generally determined by adding the amount of money needed for upfront costs such as buildings, equipment, inventory, etc. to the expected operating expenses for a period of time, such as six months or a year. These operating expenses should cover the owner’s salary as well as the debt service on any loans. From this data, develop a detailed monthly cash flow projection covering one year and an annual projection covering three years. This process helps ensure the borrowed money can be repaid and the business will prosper. The SBDC Network will be happy to help you with this procedure, for free!

Is my credit score important when applying for a loan?

• Credit scores are increasingly becoming a critical decision factor in successfully obtaining a loan. Most financial institutions consider the way a person handles his or her personal credit as a good indicator of how business credit will be handled. Prior to applying for a loan you should obtain a copy of your personal credit report along with your credit score. Even with a great business plan, a poor credit score can prevent you from getting a loan. The SBDC can help you assess the impact of your personal credit score on business financing.

How do I find out what my credit score is?’

• You can obtain your credit score from each of the three major credit-reporting agencies as well as other independent organizations. Unlike your free credit report allowable twice a year under Georgia law, you may have to pay a fee to obtain your credit score. Some independent organizations may offer a free credit report and credit score, but there is often a catch. It is important that you check these organizations for references before you provide them with personal information. For additional information, click on reference

Are there government grants for my business?

• Generally, there are no government grants available for small businesses. In fact, the term grant may be a misnomer, since grants simply pay for services the government needs done. Most government grants are awarded to non-profit organizations or local governments, not to private companies. An exception could be the SBIR or STTR programs, which fund the research and development of technological innovation that meets specific government needs. For more information on these programs, click on reference

What documents will I need to apply for a loan?

• Typically, you will need the following documents: a credit report, personal financial statement, tax returns for the last three years (if currently in business, both business and personal tax returns), as well as copies of contractual agreements (for example, a copy of a lease). Depending on the situation, lenders will likely want to see a business plan, or at a minimum, financial statements demonstrating how the loan will benefit the business and be paid back. If you are seeking financing for your business, contact the SBDC for assistance.

Does the SBDC make loans?

• The SBDC does not make loans. However, the SBDC can assist you in preparing to obtain financing. Writing a business plan, making cash flow projections, and suggesting various sources of financing (including SBA loans) are all available to you.

Will the US Small Business Administration lend me money?

• No, the SBA does not make direct business loans. However, it does provide guarantees which eliminate some of the risk to its lending partners, such as banks, community development organizations and microlenders. SBA partners lend money to small businesses based on the guidelines for each of its three loan programs. (The SBA does make some direct loans under very specific circumstances under their Disaster Loan Program.) For more information, click on reference.

Are there non-traditional loan sources?

• Yes. There are several kinds of non-traditional sources of financing such as microlending programs, angel investors, venture capitalists and various other non-bank lenders. For ideas about non-traditional financing sources, contact the SBDC.

What are angel investors and how do I find them?

• An angel investor is a wealthy individual who provides capital for early stage or start up businesses usually in exchange for an ownership stake in the company. Angels often provide funding for businesses that need more capital than is available through personal and family investments but are not large enough to attract venture capitalists. Angel investors often organize themselves into angel networks or angel groups to share research and pool their own capital. Two good sources of information with more details about angel investors and how to find them are www.angelcapitalassociation.org and www.angelcapitaleducation.org.

How can I get access to venture capital?

• As a rule, venture capitalists are not looking to fund small businesses because the large amount of dollars they typically invest (millions) are beyond the scope of most start-ups. Also, VC\’s invest in companies that they believe will generate huge returns in a relatively short period of time. If you think your company would be attractive to VCs, the Georgia SBDC can help you create the financial projections you will need as well as help you identify interested venture capitalists.

Can I get an SBA guaranteed loan to refinance present debt?

• Yes, if the debt is a business debt (i.e. not personal) and the refinance must result in a minimum of 20 percent improvement in cash flow.

Legal Issues

What legal entity should my business be?

• There are a multitude of choices for your business entity but the most common are: sole proprietorship, partnership, C Corporation, S Corporation or Limited Liability Company(LLC). Choosing the legal structure for your business usually is a function of liability and tax considerations. Also, as businesses mature, their legal structure may change to accommodate growing complexities. Look at the principles and/or investors for considerations of liability, residency or tax consequences that can influence the choice. Secondly, examine the nature of the business to gauge risks inherit in its operations. Finally, consult with your accountant and legal advisor for input on legal entity choice.

Do I need a lawyer to start a business?

• Even though an attorney is not required, we recommend you consult an attorney, especially if the company you seek to form has more than one owner. Forms and instructions for each type of business entity are available at the Georgia Secretary of State\’s office.

Where do I obtain a business license?

• Business licenses are issued by the municipality or county in which your business is located and fees may vary by location and type of business. For more information, call your local city or county business license office.

Do I need a special license for my business?

• Certain businesses are subject to special permits, licenses and inspections. These include schools, employment agencies, child care centers, securities dealers, motor transport, financial institutions, public entertainment, detective agencies, cosmetologists, heating and air, refrigeration, plumbers and electricians. Information about licensing, permits and inspections can be found through your local licensing or inspection office or through the Secretary of State.

Can the SBDC review my legal paperwork (i.e. leases, contracts, etc.)?

• SBDC consultants do not provide legal advice. We encourage you to establish a relationship with an attorney that specializes in business issues who can review your legal documents.

What is the difference between an employee and an independent contractor?

• If you have care, custody and control over how your “worker” does the job, classify them as an employee. Generally the definition of employee is an individual uses your tools, comes to work on your schedule, and you supervise their efforts. An independent contractor owns his/her own company and offers their services or products to several clients. A freelance floral designer who works overflow for several florists during the year is an independent contractor; the floral designer who only works for you part time is an employee. The IRS

How can I best comply with immigration laws?

• The SBDC strongly advises management to periodically review the laws dealing with immigration and maintain compliance with federal and state laws. Click on reference for filing requirements.

Do I need Workers Compensation Insurance and how do I obtain it?

• Georgia employers with three or more employees are required by law to carry Workers Compensation Insurance. This insurance is regulated by the State but sold by local community insurance agents. A minimum of three quotes is recommended. Owners that work in the business are considered employees but can exempt themselves from workers compensation insurance coverage. For more information, visit the State of Georgia State Board of Workers Compensation website.

What are trademarks and service marks?

• A trademark (for example: Coca-Cola) and a servicemark (for example: UPS) are ways to protect someone else from using the same name as the one you have selected to market a product or service. A trademark/servicemark may be used to prevent others from using a similar mark, though it cannot be used to prevent others from making or selling the same goods or services under a clearly different mark. A trademark, issued by the US Patent and Trademark Office, lasts for 10 years and can be renewed. For more information and trade and servicemarks, go to http://www.uspto.gov.

What is a patent and how do I obtain one?

• A patent is a document that grants an inventor protection of his or her unique invention or technology for a limited period of time. It excludes others from making, using, offering for sale, selling, or importing the invention. To be patentable, the invention must be new, useful, and non-obvious. Patents are only granted to the inventor but as a property can be: sold, assigned, pledged, mortgaged, licensed, bequeathed, and donated. There are three types of patents: utility, design, and plant. As obtaining a patent is expensive, the inventor should first determine if there is a market for the invention and conduct a patent search to determine if there are existing patents that would preclude his invention or that are so similar as to make his invention worthless. If he decides to proceed, the inventor should file a patent application with the United States Patent and Trademark Office (USPTO). The entire process can take 18-24 months depending on the complexity of the invention.

What is a copyright and how do I obtain one?

• A legal device that provides the owner the right to control how a creative work (either published or unpublished) is used. A copyright is comprised of a number of exclusive rights, including the right to make copies, authorize others to make copies, make derivative works, sell and market the work and perform the work. Any one of these rights can be sold separately through transfers of copyright ownership. For more information, click on reference link.

Marketing

How do I find and attract customers?

• The first step is to have a clear understanding of your customers\’ market segments (customers fitting into smaller subgroups broken down various ways: for example: by geography, age, behaviors or lifestyle). ˜Knowing your customers\’ market segments helps you determine the most effective way (newspaper ads, direct mail, radio, networking) to reach each segment. ˜Consultants at the Georgia SBDC Network have access to demographic data, as well as expertise in designing effective marketing campaigns to help you find new customers for your business.

How do I put together a marketing plan?

• The first step in creating a marketing plan is to analyze your current situation and see how you fit into the ?market.? You must consider factors such as competition, the economy, political, legal and regulatory environments, advances in technology, and the changes in demographics, attitudes, beliefs, norms, customs and lifestyles of your target market. Next, you must conduct at SWOT (strengths, weaknesses, opportunities, threats) analysis to determine what internal strengths and weaknesses exist as well as what external opportunities and threats exist, so you can then determine what needs to be done, marketing objectives and how it will be accomplished, marketing strategies. Then the strategies need to put into action and the results must be measured and evaluated to see if goals are being met or if changes need to be made. Please contact your nearest SBDC office for further details and assistance in developing a marketing plan for your business.

How much should I spend on advertising?

• How much you should spend on advertising will depend on the industry, your marketing strategy and your intended delivery vehicles. If you are selling business to business you probably do not need to spend very much, but if you are selling to consumers in a mass market you will need to spend a lot more for advertising. A general rule of thumb is that small business owners should allocate from two to five percent of gross sales but as much as ten to fifteen percent of expected gross sales when launching a new product or service or when competing in the mass market. Georgia SBDC consultants are available to help you with industry information, delivery vehicles and planning your advertising budget.

What is the best form of advertising for my business?

• Every business has a “best” method of advertising. Experience is a good teacher, so compare the methods used by your successful competitors with what you plan to do. Use caution if you plan to do something radically different from what others have done. Create and utilize evaluation methods as part of your advertising campaign in order to judge the effectiveness of your efforts. SBDC consultants can help you evaluate advertising alternatives and evaluation methods.

Do I need a website?

• A website is an essential marketing tool for almost every businesses. Before spending a lot of money on development and design, investigate a number of web development and hosting services. For more information on maximizing your online presence, talk with your local SBDC.

Does the SBDC conduct market research?

• Yes, the SBDC’s Applied Research Division (www.sbdc.uga.edu/research) is available to provide in-depth customized market research for clients on a fee basis. Research staff works closely with entrepreneurs to help them better understand their market, designing market-based studies in the form of surveys or focus groups to analyze shopping patterns, consumer preferences, and other essential characteristics about the market for their product or service. In addition, SBDC business consultants regularly assist (at no charge) clients with identifying key information for inclusion in business or marketing plans, or for compiling loan documentation.

Does the SBDC offer classes in marketing?

• Yes. These classes provide useful information on how to market your business using effective and unique strategies designed specifically for small businesses. Learn simple secrets on how to maximize your marketing dollars and enhance your profitability. Check to see if there is a class scheduled in your area by visiting our website (see reference links).

Taxes

Do I need a Federal Employer Identification number?

• Your business needs an EIN if it has employees, has a Keogh Plan, or files one of the following tax returns: excise, fiduciary or alcohol, tobacco and firearms. A sole proprietor with no employees and none of the other items listed above may still need an EIN for fraud protection, contracts procurement and some loan programs. To apply for a Federal EIN, click on reference.

Do I need a state tax ID number and how do I obtain one?

• All employers are required to have a State withholding number. This number is used to identify and deposit State of Georgia income tax withheld from employee checks. Contact the Georgia Department of Revenue Income Tax Division at 404-417-2311 or www.gatax.org. All employers are also required to have a Georgia Department of Labor number in order to pay State Unemployment Insurance on behalf of their employees. Applications are available on-line or through your local Department Of Labor office.

What is the self-employment tax? Do I have to pay it?

• Sole proprietorships that report a profit on the IRS Schedule C are required to pay self-employment tax on that profit. The self-employment tax rate is 15.3 percent of the profits of the business (the same as the total of the employer and employee’s Social Security and Medicare contributions). Sole proprietors are not subject to IRS Form 941 withholdings, but they may be required to make deposits of estimated federal and state taxes based on the profits of the business.

Are there local business taxes?

• All businesses operating in Georgia are required to pay property (ad valorem) taxes on real and personal property of the business.˜ Property taxes are assessed and collected by individual counties.˜ The Georgia Department of Revenue web site has links to local tax offices through the State Property Tax Division.

Do I need to collect sales tax?

• Yes. If you sell or rent tangible items to the final consumer, you must collect and remit sales and use tax. There are certain types of sales which are exempt. For more information, click on reference.

How do I find a good CPA?

• To find a good certified public accountant (CPA), ask the professionals in your area who rely on using financial statements produced by CPAs. For example, your local bankers, attorneys, successful business owners or SBDC consultants should be able to supply you with several excellent referrals. Then you should interview several CPAs to determine which one can communicate effectively with you as well as negotiate a price you are willing to pay for the accounting/tax services needed to operate your company. It is a good idea to obtain an engagement letter from the CPA that includes the services to be provided and the costs of the services.

What business expenses can I deduct?

• As a small business, the types of expenses that are deductible are very important to consider. The Internal Revenue Service states that in order for an expense to be deductible, it must be ordinary and necessary in conducting the business. There are many rules as to the documentation that must be provided to maintain the deductibility of an expense. For assistance in clarifying these rules, seek assistance from you local Small Business Development Center consultant.

Writing a Business Plan

Why do I need a business plan?

• A well-written business plan improves your probability of success by helping you evaluate the feasibility of your business idea in an objective way. The plan is much like a road map for your business and helps you identify opportunities, avoid mistakes, and develop production, administrative and marketing plans, as well as budget guidelines. The plan also serves as the foundation for your funding proposal and provides lenders and investors essential details about your operation, financial strategy and the amount and type of financing your venture requires. To see an example of a business plan, click on reference.

What are the elements of an effective business plan?

• A business plan includes sections on operations, marketing, management and finances. For an example business plan outline, contact your local SBDC. For a number of sample business plans, click the resource link.

What is a feasibility study?

• A feasibility study is a detailed preliminary evaluation of your business idea to see if it is worth pursuing. A feasibility study includes the assessments of the management team, market prospects and potential pitfalls.

Will the SBDC write my business plan for me?

• No. The SBDC can assist you in developing your own business plan. For a comprehensive list of local and online business plan classes, click on reference.

Who should write my business plan?

• You should. Writing your own business plan will force you to think through important issues that you may not otherwise consider. Contact your local SBDC for assistance in developing your business plan. For a comprehensive list of local and online business plan classes, click on reference.

Do you recommend business plan software?

• The advantage of off-the-shelf business planning software is that it helps you organize your business plan and gives you good examples to help you craft your own document. Most software packages generate charts and graphs from the financial spreadsheets incorporated into the plan. The disadvantage is that these plans often look ?canned.? Loan officers receive hundreds of these plans and can instantly recognize them. If you copy the examples from the business plan software into your plan, loan officers will recognize that it is not your work and will probably discount its credibility. All you need to create your own business plan is a word processing program and a spreadsheet program. Your local SBDC office can provide you with guidelines, examples, individual counseling as well as classes to help you write an effective business plan.

How long will it take to write my business plan?

• Writing a business plan is a difficult and arduous task and can take anywhere from 20 hours to several months. It depends on the complexity of the business venture or project that you are planning and how much information is needed to thoroughly complete it.

Does the SBDC offer classes on writing business plans?

• Yes! Classes are offered locally or online. For a comprehensive list, click here.