Funding Guide For Small Business Coaches

Funding for Small Businesses: The Guide
Identifying and Prepping Clients to get funded

A guide for Small Business Technical Assistance Providers
Prepared by LEDC Staff

November 2017
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Latino Economic Development Center | lending@ledcmetro.org
ledcmetro.org/our-programs/microlending
Funding for Small Businesses: The Guide
Identifying Clients who can get funded
A check list for Small Business Technical Assistance Providers
Introduction:
This guide was created with business coaches and consultants in mind, specifically to help bring
transparency and direction to the process of prepping their entrepreneur clients for loans. We want to
thank all readers for your curiosity to seek out additional points of views and resources to prepare
yourself or your client startups for funding. LEDC is very excited to get to know DC-area business
coaches and businesses. Please see this guide as a first step in getting to know LEDC. We welcome you
to contact us and to speak with a loan officer one-on-one or in person. Our department can be
contacted at lending@ledcmetro.org and 202-540-7421.
About LEDC:
Founded in 1991, Latino Economic Development Center (LEDC), is a Community Development Financial
Institution (CDFI) and SBA Micro-Lender that serves the entire small business community regardless of
age, race, gender or other characteristics. As a not-for-profit organization, we take a holistic and
community approach to evaluating loan clients. LEDC has provided 153 loans to DC area small
businesses in 2016 alone. Our clients include superstars such as Sweetgreen, Bad Saint, and Sticky
Fingers Vegan Bakery as well as hundreds of other businesses and startups serving the local
communities. LEDC provides loans of $5,000- $50,000 for small businesses and startups with rates
ranging from 7.75%-14% (clients who have a credit score of 640+ will qualify for our lowest rate). Our
loan terms range from 12-60 months.
Members of LEDCs lending staff are available for one-on-one meetings with you or your clients, and
additionally to host trainings or attend as speakers for any groups of entrepreneurs you may know or
work with.
This guide provides eight sections:

1. The type of clients CDFIs often serve
2. The deal breakers
3. Steps to ensure a strong loan application
4. Special notes on business plans for startups
5. When your client is accepted or rejected
6. Resource: Business plan evaluation sheet
7. Resource Template business plan
8. Having your clients apply
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Who LEDC Serves LEDC jumpstarts entrepreneurs
ONE: LEDC serves people who often have difficulty
with funding. Our best clients
accessing financing, including people in the following often have risky attributes
situations: such as launching a startup,
Bankruptcy from 1-12 years ago lower credit scores, come from a
Low credit scores
low-medium income bracket.
Immigrant business owners without a US
Passport or green card We are ready to serve all who
All stages of companies from idea-stage have diligently built their
startups to well-established businesses businesses or skills to launch
Spanish-speaking population
their business.
All clients regardless of race, gender, age (if
over 18)
TWO: These are deal breakers for LEDC.

LEDC cannot lend to people who:
Are late on their mortgage payments, or are relying on other people to make mortgage
payments
Owe business taxes or personal taxes
Are late or behind on child support
Have had a bankruptcy less than 12 months ago
Want to open a bar, strip club, casino, marijuana business, or fund house flipping activities
Public records are bad, but perhaps could be worked with:

Any public records: "Public records" refer to county, state or federal materials that are typically
viewable by the public. Examples of public record information that are often included on credit
reports are bankruptcies, civil judgments, tax liens, foreclosures and wage garnishments.
The number one thing CDFIs look for is: Will this person be able to pay us back?
LEDC determines this by looking at how the applicant/s are managing their finances at this point in time.
For instance, LEDC cannot lend to someone who is having trouble paying their bills. Do the clients seem
to live a modest life and make their payments on time, and are they seeking an investment that logically
would generate more income in the future? This is a GOOD kind of client.
If your client has one or more of the deal breakers, please coach them in order to take care of the issue
before bringing them to a CDFI to seek funding.
If your client is free of deal breakers, lets move on to what it takes to build a strong applicant.
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Application Prep
The loan officer will guide
THREE: Steps to ensure a strong application for a loan you in providing useful
As a business consultant, you are there to help your
clients think differently about their business plans, and additional information to
to present themselves accordingly. Thus, your role can strengthen your business
be really helpful in putting them in a position to receive
funding. If you follow the steps below, you will get to case for a loan. LEDC
know your clients very well, and also gather a lot of the focuses on clients strengths
information that a loan officer needs in order to
determine if your client can receive funding. and helps them identify
their assets.
The Steps to take with your client/s:
Create a project budget: and statement of why
they need the funding.
o This can be a narrative statement, backed up by a simple budget. A good test is to
evaluate the story your applicant creates. It is good if the applicant presents a story for a
funding need that illustrates the reason for the need of investment and that the line
items in the budget are reasonably priced.
Determine Co-signers: Determine who should be co-signers on the loan. This includes official
co-owners of the business who own over 20% (loan officers will ask for documented proof of
ownership) and will include any person who substantially splits costs (mortgage, car payments,
bills) with any of the owners if the business is just starting up, or the applicants are otherwise
not financially independent.
Prove Business Ownership: Determine who exactly are the owners of the business, and what
percentage does each owner hold.
o Ask the owner
o Look on the tax returns for evidence
o Look at an operating agreement
o Personal documents (taxes, bank statements, credit report, signature on the loan) are
required of each person who owns more than 20% of the business
Cover Living Expenses: Are the owners currently paying all of their living expenses with their
income, or are other family members subsidizing the expenses? It may be ok if other family
members are subsidizing the applicants expenses, the lender will just need to know who they
are, what expenses they are paying, and possibly include them as a co-signer on the loan (and
collect their taxes, W2s and bank statements). This is because if the entrepreneur/s are not
actually financially independent, the lenders will need to take that into account.
Remediate any personal credit issues: Check the clients credit scores, go over their credit
report on Credit Karma this will be good for you to know. If you see glaring problems they
didnt mention to you, find out the story. Have them pay off any collections as they are able to.
All co-signers will have their credit histories pulled eventually by a financial institution, so there
is nothing for the applicant to hide from you, their business coach.
Discuss a collateral plan: LEDC requires 50-100% of loan value in collateral. Collateral value is
most often found in paid-off cars or cash collateral (for instance, LEDC can double any cash you
put in an escrow account with LEDC). Copies of titles and proof of insurance are required for all
vehicles that your client will use as collateral. Titles must be clean before closing. Collateral can
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come from any person. Does not have to be a co-signer. Collateral items can also include an
investment property in the DC, Maryland and Virginia area, business equipment items (such as
machinery over $1000 in value each), and in some cases, accounts receivable or contracts
when the payer of the contracts agrees to pay LEDC directly.
Gather all necessary basic documents from ALL co-signers:
o Two years of your most recent tax returns, both business and personal;
o Three months of your most recent bank statements, both business and personal;
o Articles of incorporation for your business, copy of applicable business licenses and
permits;
o Lease agreement (if applicable);
o Financial statements of the business, income statement (profit and loss) and balance
sheet;
You are welcome to send any already existing financial records
o Copies of titles and proof of insurance for all vehicles that you might plan to use as
collateral. Titles must be clean before closing.
FOUR: Special instructions for startup companies (1 year or less):
For startups, LEDC requires 6 months of bank statements instead of 3 months. All other
documentation remains the same.
A business plan is necessary for a startup company. Business plans do not need to be very long,
very wordy, or follow a certain template. However, they do need to address key market,
operational and budgetary concerns.
Use the below business plan analysis sheet (page 7) once you have been working with your
client to determine areas of strengths and weaknesses of the business, the entrepreneur, and
the business plan. You can then work together with the entrepreneur to strengthen areas that
are currently risky. For instance, perhaps your client wants to open a hair salon, but does not
have experience working in a salon. You can suggest that they get a job at a salon to build their
experience in the area.
A template business plan is included on pages 9-11. You can use this as a guide to create or
strengthen your clients business plan. There is no correct format of a business plan. So dont
feel like you need to change your plan to fit the following format, but perhaps check all the
bullet points to make sure your clients plans address these questions.
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FIVE: The decision point
Most entrepreneurs have
When your client is approved:
Congratulations, thank you for your partnership in
what it takes to be
preparing a great person who is on their way to serving funded; If not now, then
their market in a unique way that will allow for them to
provide for themselves, their family and their soon. LEDC will share
community. Were very excited for them! their perspective on the
When your client is rejected: path forward.
Sometimes you both have tried your hardest, and your
client is still rejected. Often this is because the expenses of the client/s exceed the income they are
making. It could be that the client does not have enough of a track record in the field and doesnt have
enough risk-mitigating factors to allow a loan to be made. No client exists who can NEVER be fundable.
It is their mindset, business plans, and the situations they find themselves in that can determine
whether they are fundable are not. All clients have the potential to be funded, they just may need to
take additional steps to get them there.
At LEDC, we not only provide reasons why we cannot fund a client at a specific time, but also situations
that would need to change in order for us to serve your client. For instance, a rejection reason might
sound like this:
We are unable to fund your business at this time. But, we believe in you! Right now your income is
not enough to fund your current expenses, and thus cannot cover the expenses of an additional loan.
If you are able to cut your expenses or improve your income enough to prove that you can afford an
additional monthly payment, then we will be able to fund you. Here are the ways that we imagine
this may be possible:
Your business earns more money.
Streamline your business operations in these ways (perhaps the loan officer has identified an
area for improvement such as subletting additional office space, etc).
Move to a more affordable apartment.
Seek a roommate and document the income for three months.
Sell an expensive car and get a more affordable car.
Take on a part-time job and document the income for three months.
Identify a co-signer who has a strong income with additional capacity to repay.
We are also happy to provide business counseling services free of charge. If you are interested in
making an appointment with a counselor who can help analyze your business plans and discuss ideas
for innovation, please let me know and I am happy to make the connection.
We also encourage you to contact us if you find yourself with more income and less expenses such
that you can afford a loan.
This is only an example of a rejection letter. Our goal is to show you that LEDC cares about each client,
and sees all clients who come through our doors as having potential to be great small business owners.
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Resources
The following pages are a few resources. The first resource is a sheet that allows the business coach to
identify strengths and weaknesses of a business plan. Many of the weaknesses can be improved upon
ahead of time. The second resource is a business plan template that a business coach can use to make
sure the business plan answers key questions and contains the right projection.
SIX: The business plan analysis sheet

The sheet which is available on the following pages can be used by the business coach or the
entrepreneur to identify strengths and weaknesses in the business plan. It will show areas of risk. Some
areas may be able to be de-risked through additional planning, additional education, or by seeking
specific types of partners or opportunities. We hope this guide is helpful, and should be seen as a tool to
strengthen business plans, and not as an obstacle to deter people from applying for a loan.
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SIX: Business Plan Analysis Sheet
Key Question Low Risk Medium Risk High Risk
Number of founders 1 to 3 3 to 4 4 or more
Number of investors 1 to 3 3 to 4 4 or more
Do they understand and have a good estimation of Yes Needs No
input costs? improvement
monthly overhead costs? improvement
startup costs? improvement
Do they have a startup budget with realistic Yes Needs No
amounts? improvement
How much coinvestment have they received Enter Amount
How much is their total budget for starting up? Enter Amount
What is the percentage of co-investment to loan 80% or more co- 31% to 79% 30% or less
amount? invesment
Is there proof of the co-investment? (Check a bank Yes Would like to see No
account statement, or has equipment already been more proof
purchased or provided to the owner?)
Have they made any pre-sales? Yes Have a prototype, No
no sales
Does the entrepreneur have experience in this area? 5+ years of 1+ years No substantial
progressively experience at least experience in the
complex or an entry level, or sector.
managerial university/
experience in the vocational training
sector. in the sector.
Does entrepreneurn understand the business's key They have proven, They have They do not know.
differentiator, be it price, location, or quality? Andthrough market identified a
have they demonstrated proof to the Loan Officer research and/or hopeful
that the business will be able to deliver on that pre-sales and differentiator, it is
differentiator? prototype unclear they can
development that deliver
they can
differentiate
themselves.
Will the client offer sufficient collateral? Business assets or Business assets or Business assets or
cash collateral cash collateral 20%- cash collateral
above 50% of loan 50% of loan value between less than
value 20% of loan value
Client's Character: Do they seem to be open minded Yes. Client is Client doesn't No, client seems
and willing to learn, and generally honest with their responsive to display complete defensive or to be
responses? questions and openness, but it hiding information.
open to may be a figure of There are multiple
suggestions from shyness or discrepancies in
loan officer. personality. the conversation.
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SEVEN: Business Plan Template
Instructions:
Use this document to serve as a guide for the headings your business plans should have and the
questions that it should answer. You can feel free to create a whole new document, or simply respond to
the bullet points in this document. At LEDC, it is your ideas that count!! LEDC also has counselors who can
help you complete your business plan. Contact dfreidman@ledcmetro.org if you would like to be
matched with a business counselor.
Business Plan Narrative:

Overview of Product/ Service Solution
What your product or service does and for whom?
If it is location-based, share the location and if you have secured a storefront yet
General description of your products and services
Why did you decide to open this business?
Why is it a business opportunity?
How will you deliver/manufacture or distribute your product/service?
Customer Problem
Description of customer pain- What is the customer problem you are going to solve?
How do you plan to solve it?
Key Players: Why youre the right person/team to pull this off?
Founders with % of ownership, other team members, key advisors and/or partners:
o their roles, industry background, expertise, and experience
o biographies or resumes can be created
Why are you doing this?
Market Opportunity
Target Market: Who are your main customers?
o Geography
o Demographics
o Income
o Interests
o Purchasing behaviors
List main customers you already have been serving, along with any contracted amounts
Market size
Market growth
Why your business will go faster than competition
Financials
Be sure to prepare three years of projections and a business balance sheet as a part of your
Business Plan
How much of your own money have you already invested into the project, and on what did you
spend it so far?
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See the financial templates further down the page.
Competitive Landscape
Industry Size
Major Players: Current and future competitors
Typical business model characteristics of business model of competitors
Local Trends, Threats, and Characteristics:
o How strong is competition between companies in your industry?
Summary of sustainable competitive advantages: Why is there a strong case that your
customers will access your offerings through you rather than your competitors?
o How easy is it for a new competitor to jump in and take over your business?
o How strong are your relationships with suppliers? How fixed are prices and do you have an edge
in any way?
o Do your customers have the power to bargain with you?
Go-To-Market Strategy
How you will sell, deliver or distribute your product, service or solution?
Key partners/distributors, if any
How will customers learn about you and access your product/service?
Key milestones and dates you hope to achieve those milestones?
Have you made any pre-sales, or tested the product or service on anyone? If so, please describe.
Product/Service Development & Key Milestones

Stages and timeline you plan for in product or service development
Partner relationships you hope to develop as your company grows
Critical Risks and Challenges

What can go wrong and how you plan to manage it?
Legal considerations
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Financial Projections:
(You may also prepare this section using excel) The financial projections should include three sections:
Startup Budget things you need to pay for just ONE time in order to open.
Make a list of each item and its cost. Often includes items like: buildout of retail space, purchasing
equipment, signage, launch event costs, down payments on lease, business registration and more. You
can have a simple budget, but should be able to understand how you came to those numbers in each
line item.
Example startup budget

Item Cost
Buildout $10,000
Salaries for 2 months $5,000
Lease down payment $5,000
Espresso machine $10,000
Monthly Income using Cost of goods sold (COGS), unit sales price and estimated number of units
sold.
The COGS are relevant for industries with input costs such as food (for meals), and the retail sector
(where you buy and resell a product). Some industries will not have a COGS (such as consulting, or other
service-based companies). Then you would need to estimate the income based on estimated number of
units sold. For each good or service, you can create an example such as below.
Example:
Breakfast COGS: $5
Sales Price: $11
Number of breakfasts sold/day: 20
Description COGS Sales Price Difference # sold / day Total

(the unit profit) profit/day
Breakfast $5 $11 $6 20 $120
Lunch $7 $15 $8 30 $240
Monthly Overhead Costs

Monthly overhead costs include expenses such as: Rent, utilities, salary and benefits, supplies, uniforms,
maintenance. Simply make a list of each expense and how much it will cost.
Example monthly overhead budget

Item Cost
Rent $5,000
Salaries $2,500
Utilities $1,000
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EIGHT: Having your clients apply
Your clients are ready to apply once you have worked with
your clients to ensure they have:
A business coachs role in
no deal breakers,
their necessary documents, encouraging economic
a well-developed business plan and plan for funding, success is invaluable for
a plan for collateral
first-time entrepreneurs.
Applying is as easy as filling out the online application form LEDC thanks you for your
and then emailing their documents to:
lending@ledcmetro.org
leadership in this journey.
Reach out to loan officers
The client may fill out the online application form here:
http://ledcmetro.org/smallbusiness/apply/
with any questions you may
have along the way!
The documents for the loan include:
Two years of your most recent tax returns, both
business and personal;
Three months of your most recent bank statements, both business and personal;
Articles of incorporation for your business, copy of applicable business licenses and permits;
Lease agreement (if applicable);
Business plan (if business is less than 1 year in operation);
Financial statements of the business, income statement (profit and loss) and balance sheet;
- You are welcome to send any records you already have.
Copies of titles and proof of insurance for all vehicles that you might plan to use as collateral.
Titles must be clean before closing.
Loan information for LEDCs business loan is available on the following page.
Members of LEDCs lending staff are available for one-on-one meetings with you or your clients, and
additionally to host trainings or attend as speakers for any groups of entrepreneurs you may know or
work with.
We hope that you have enjoyed this guide, and welcome any comments to lending@ledcmetro.org
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Funding Guide For Small Business Coaches

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Funding Guide For Small Business Coaches

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Drepturi de autor:

Formate disponibile

Funding for Small Businesses: The Guide

Identifying and Prepping Clients to get funded

Prepared by LEDC Staff

This guide provides eight sections:

TWO: These are deal breakers for LEDC.

Public records are bad, but perhaps could be worked with:

FOUR: Special instructions for startup companies (1 year or less):

SIX: The business plan analysis sheet

Business Plan Narrative:

Product/Service Development & Key Milestones

Critical Risks and Challenges

Example startup budget

Description COGS Sales Price Difference # sold / day Total

Monthly Overhead Costs

Example monthly overhead budget

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