Learn About Investors and Loan Options for Your Small Business - Part 1
Hi everyone, welcome to this live stream, learn about investors, and loan options. For your small business part one, hosted, by grow with google, and primer. Grow with google helps people grow their skills, careers, and businesses, by offering free digital skills, training and tools. Primer is a free app created by google that you can download, to your phone. This has a series of short fun lessons that are all about less than five minutes each, and they're all designed to help you sharpen your business and marketing, skills. I'll start by introducing, myself, my name is anna grimes, i've spent most of my career in sales and marketing, mostly, in fintech. And financial, services. Then a couple years ago i started a coaching and consulting, business, for female entrepreneurs. Looking to grow their presence online. And now i'm an instructor, here at grow with google, i'm so excited that you're here with us today. I'll be working with my co-instructor. Baseem, who will be answering some of your questions, at the end of the workshop. Whether you're starting a new business, or you're already managing, one, it's really important to understand, the different options, for finding the funding that you might need for your business. This is a two-part, presentation. In part one which we're covering now, we'll review, loan options. I also encourage you to participate, in part two, where we will discuss, the options, for investors. To register for part two visit g dot co, slash, grow, on air. We want this to be as helpful for you as possible, so make sure to post your questions. Directly, under this live stream video. We'll choose the top voted question so make sure that you upvote your favorites throughout today's workshop. If we don't get to answer all of your posted, questions, our team will reply, and answer, all of the questions, directly, in the q a, shortly after the virtual event concludes. If you'd like to access the additional, resources, for this class, click on the resources, tab at the top of the screen. You will also be able to access a replay, of this virtual event in the future, by just clicking on demand, on the grow with google on your. Also don't forget to post and share. With your friends, on social. Using the hashtag, growthgoogle. Finally, you also have the option to turn on youtube's, closed captioning, to follow along. To do so click the closed captioning, button, directly, on the video player on your screen. Now, let's dive in and get started. Before we begin i want to be sure that everyone, understands, this presentation. Does not offer, tax or legal advice. It introduces, general, concepts, and resources. I am not a tax professional, or a lawyer. Make sure to contact, your tax professional. Or lawyer, to confirm, what's best for you in your. Business. As we all know, it costs money to start and operate a business. Some people use their personal savings, or spend time saving up, or, they ask for money from friends, and family. Other people, will get business, loans, or investors, to start or grow their business. There are a variety, of options for funding so it's important to understand. What they are. And how they may impact, your particular, business, so that you can make the best decision, for you and your business. Today's workshop, has five sections. In the first section we'll, talk about the differences. Uh. In funding options. Then we'll go, deeper, into what are called small business loans. Next, we'll talk about, micro, loans. And then after that we'll have an activity, for you to try. And finally we will provide, some key takeaways, and additional resources. Now let's go ahead and get. Started. Let's start by talking about what funding. Your business, actually, means. For a new or growing, business, money can be central, to success. So it's good to know how much you might need. That starts by understanding. Your business costs. Your costs will then help you estimate, profits. And see how much money you need to break even. Knowing your costs and estimated, profits, are key to applying, for a loan or talking to investors. Having this information, may also help you when it comes to tax time. Personally, speaking, as a business, owner i know keeping, track of all of my expenses. Going. Coming out of the business, and also my profits coming in. Month over month is so important, to making projections. About my business. Success, as well as planning, for, that all-important. Tax. Time. A key to estimating, costs, is being organized.
Personally, Speaking, i, live in google sheets keeping all of my, expenses. Or my profits, how much i've spent on certain different categories. Organized, in google sheets, so break out a spreadsheet, or some sort of budgeting, software, and get ready to create a clear picture of your finances. Start by listing some items your. Most businesses, need. In addition to office space there are supplies, like desks, and pens. Utilities, like electricity. And heating. Communications. Equipment, and any necessary, licenses. Permits, or insurance. You also want to account for paying employees. If you have them. Or if you don't maybe outside, consultants. Like lawyers, accountants. Or marketing, professionals. And yourself. It's so important to consider yourself. As an employee, both from a tax perspective. But also, when it comes to looking at the total health of your business. Plus there's marketing and advertising. Including things like market research. Buying ad space, and, building your website. Note which expenses, will be one-time. Costs. This is especially, true for my new business owners, you're going to have a lot of costs in the beginning. That are part of just, launching, the business, but you might, not have those expenses, moving forward and that's important to note. These are those those, one-time costs are typically those initial, costs needed to start or grow your business so it might be something like, buying major equipment. Designing, your business logo, or paying a permit that allows, you to actually, open your store. The rest of your costs are repeating, expenses. These generally, help you to sustain. Sustain, your business, and include, things like salary, of your employees. Rent, utility bills etc. Calculate, how much each of these will cost you over one month, one year, and five years. Add up your total expenses, to see how much money that you'll need, and when you'll need it, this might also be true for. Seasonal, changes, for example. You might need to, hire additional, staff, for the holidays. So it's really important to make note of those, additional, expenses, that might come up in the month of november. Make separate calculations. For monthly costs, annual expenses. And, your five-year budget. Once you know how much money you actually need, you can start to evaluate, the different, ways to find funding, for it. Different businesses, need different types of funding, choosing the right funding source may help you avoid problems like having too much debt, or signing, contracts, that are wrong for your business. There are a variety, of funding, options, available, you must decide.
Which Is the best option or options, for you personally. And for your business needs. If you have personal, resources. You may be able to fund your business yourself, let's say you've been saving up money for a long time or you have friends and family that want to invest in your business. In that case you can continue. To own 100. Of your business. If you find venture, capital, or investors. Most likely they will want a percent, of your business in exchange, for giving you funding, this could also be true for friends and family. So you will no longer own 100. Of your business. As i mentioned earlier. You can learn about getting investors. In part two of this presentation. You can sign up for that workshop, at g, dot co. Grow, on air. If your business has a compelling, story, where it solves, a big problem for an audience, maybe it's a product that people have been dying for. You may be able to use what's called crowd, funding, to get a lot of people, to contribute, small amounts of money to your business. Let's say that you're coming up with a product, it solves a huge problem for a big audience. You can. Launch this particular. Idea. And, have people invest, in that product. Indicating, that they would actually purchase, it, before you've even created, it, that way you're building your audience. And your capital, for, that the creation, of that product. Before, production. So then you can use that money to produce, the product, and then sell it back, to, your. Uh crowdfunding. Uh, supporters. During this presentation, we're gonna take a deeper, dive, into. Other ways to find funding. Ways, that include small business, loans, and what are called micro loans. First we'll go into small business loans. Picture pearl who owns a jewelry store called you guessed it, pearl's, pearls. Business has been great and she's thinking about opening a second location. Pearl has saved up some money and created a strong business plan. Still she knows that she'll need more money to open her new spot. Pearl doesn't have a very strong. Social network or any flashy, marketing materials. She's also not trying to create a business with millions of customers, right now she really just wants to open another, store. So what's the best way for her to get funding, for her new location. Let's look at the options here. Option number one, from. A lender who specializes, in startups, that can grow quickly, and easily. Also known as venture capital. Number two from lots of people who see her marketing and each decide, to give her a small amount of money, also known as crowdfunding. Or from a bank that's familiar, with the needs of small businesses. Also known as a business, loan. Now if you're thinking about these three different options. You, probably, know that the best option for pearl is to get funding, from a bank that's familiar, with the needs of small businesses. Also known as a business loan. Why is that, well let's see what we know about pearl. We know, that pearl. Is, not looking to grow super quickly she's just looking to add another, location. She may want to keep, a 100. Ownership, of her, jewelry store so venture capital might not be the best solution for her, she also made it clear that she doesn't have, a big social following, she doesn't have access to a large, audience. That she could get, that crowd funding, money from. So it looks like the bank might be the best option for her. A small business, loan is like other types of bank loans, if you've ever gotten one before. After you get the loan you'll need to make regular, payments, usually monthly payments. Plus, interest, until you paid that paid back the loan. These loans are designed, to help you to grow your business, you can use money for things like buying equipment, or office supplies. Paying, your team of employees. Or purchasing, the raw materials. That you need. If you want to get a small business loan start, with your local bank, different banks have different rules, you may need to go to several banks until you find one that is right for you and your business. A lot of small business owners will stop start with the bank that they already bank with, so. The bank that you already have your personal checking, or savings, account with.
Before, Approaching, your bank, you want to make sure that you're super clear on why you need the loan. For some businesses, you need working capital to help you meet your day-to-day, needs, you usually pay that type of loan back in a year. An example. Is a retail store that has to buy inventory, in the fall. To sell during the holiday season. They're going to know that they're going to be able to pay back that loan really quickly, because they're going to sell that inventory. In the holiday season, and be able to pay it back in the new year. Other businesses. Need things like growth capital. With that you may have more time like up to seven years to pay it back. A printing company may need a loan to buy a high capacity, printing press, so it can grow in the years to come but obviously, they can't, actually, start that business, and begin, to collect revenue. Until, they have the printing press that they need to be able to actually launch the business, so that loan's going to become really important. Regardless, of what type of loan you think you need, be sure that you don't take on more debt than you can afford. This can sometimes, be, a really difficult, choice, for business owners, and can result. In, the business, not finding, success. If you do have a chance to get a loan, you also may need to offer what's called collateral. This is something of value. To your business, like, inventory. Or a building. That, the bank can take ownership, of in the event that you don't repay your loan. You may also have the option to offer up a personal, guarantee. This might be true for those of you that are launching new businesses, let's say you don't actually have a building yet or you don't have something of value in your business yet it's brand new. That means that you have to offer, something, personal, of value, like your home or your personal, car. If you don't pay back your business loan the bank can ultimately, take possession, of those items. Before, giving you a loan the bank will want to know, all about your business, make sure that it's solid. And that you're going to have no problem paying back the loan. You want to be successful, and they want you to be successful, as well. They will ask you to prepare, what's called a loan package. This typically, includes three things. A statement of purpose, which is an overview, of your loan request that explains, how the money will actually help your business. Two a business, plan that has insights, into, how your business actually works. From, product descriptions, to a breakdown of your management, structure. And three a financial, statement that takes lenders, through how much money your business, earns, now, and how much it can potentially, bring in. Non-profit. Organizations. Like small business development, centers, have templates, for these documents, that you can use as models. They also have people on their local teams. Who may be able to help you prepare your loan package, at no charge to you. You may also be able to find people in your community, to help you using, the site. Sba.gov. Sba.gov. If you have a bank in mind that you'd like to work with maybe your personal bank that you've already been using for a long time, you can ask them if they have templates, that they prefer to see, for their specific, loan packages. The statement, of purpose, as we discussed before, is an overview, of your loan request that explains, how the money will actually, help your business.
Describe, Your business, including your products or services. And then you'll build a case to demonstrate, that your business is well organized. Well run and can be even more profitable. If you have this additional, funding. Sometimes it's really straightforward. Like you have to buy a big piece of equipment, to even launch your business sometimes, it may not be as straightforward. Like. Adding additional, staff that is going to allow you to grow in the way that you know you'll grow if you have the support, of a team. While a narrative, about why you need a loan is really important, it's also important to support your request, with your actual business, plan, some of you may already have this. If you have, looked for investment, in other places. Or if you're just looking, to, get really solid about what your business is going to do. You may have already created a business plan, in, the, development, of your business. Your business plan needs to have a few different sections, though. First thing it needs to start by briefly describing, your business. And stating your vision for the company. Show your lender that you firmly, understand, where your business is now and how it can grow, you want to get really solid, and what it is that you're going to do for your customers. And how, that can be leveraged, for growth. Next provide, an analysis, of the economic, conditions. Affecting, your business. Mention how many potential, customers. You might have, and they're buying patterns. Do research, into your actual competition. And. Find out any barriers or regulations, your business might face the bank is going to want to understand. What are the challenges that you're up against and what are the ways that maybe you're different from your competition, that is going to help you, to be successful, in a market, that isn't really saturated. The market analysis, is also a chance to further explain your products and services. Expand, on the information, that you provided in the statement of purpose. And help your lenders understand, how much revenue. Your business could bring in, if you had this funding. Or loan. And you were able to use it in the way that you need to to grow your business. With the intention, of what's stated, in the business plan. Last provide a brief, overview, of your company. Write out your employees, roles, highlight the management, teams best qualities. Remember. You're trying to sell your lender on your business's, ability to work well and repay, the loan that's exactly, what the bank, is going to be evaluating.
Can This business, grow. Enough, to be able to pay back the loan, that we initially. Offered, to. Them. Now we're going to do an activity. For this activity, try using google docs to write a statement. Of purpose. You can access. Google docs, at. Docs.google.com. And sign into your google account, if you don't have a google account, you can set one up for free by going to google.com. Now for more information, on how to use google docs, reference the handout that accompanies, this presentation. By clicking, resources, at the top of the screen. Remember, the statement of purpose is an overview, of your loan request that explains, how the money will help your business. Number one describe, your business, and what it actually does. Number two highlight, products or services, that you provide. Number three, explain, the loans potential, businesses, how is this loan going to help you to get to where you want your business to be. And four share how much you and the owners, invested. I'm going to give you about five, minutes to work on this activity. Good. Luck. Okay, i hope this was a helpful, exercise, for you, now let's talk a little bit about the financial, statement. The package's, final section, is what is called the financial, statement. This group of documents, helps lenders. See. How you handle money before they decide to give you any funds. Have a cash flow statement, that clarifies, the money coming in and out of your business every month. This tells lenders how much cash you usually have on hand. Use a current 12-month, statement that projects, six months into the future. You'll also need what's called an income statement, more than just measuring your cash flow this is a record of your revenue. Your expenses. Your profits, and your losses, over a specific, time period. Lenders use it to understand your business's, overall, finances. For example. If most of the money going into your business. Is coming out in the form of expenses, you may want to reduce your expenses. So the bank can see those net profits. On the flip side of that if they see that you have low expenses. And they can see a trajectory. Of continued, growth. Or. Additional, profits, coming into your business then they're going to feel really comfortable giving you that loan. Lenders will also want to see a balance sheet for your company. This pits your assets. Things like money in your account or equipment that you own against your liabilities. Which is the money that you owe to other people. To show, your business's, net worth. This is essentially. What are, all the pieces of ownership. The, things of value you have in your business, versus. The money that you owe to others. So ultimately, are you netting, out positive, as in you have more assets, than you do liabilities.
Rounding, Out your financial, statement, is a personal. Financial, statement. This is basically a balance sheet for finances, that aren't tied to your business this is going to be about you personally. Lenders use this to evaluate, how you personally handle money and the value, of your personal guarantee, this is especially, true. If you are, putting up personal collateral. If you only need a small amount of money for your business you might want to also look at what's called getting a micro loan. Let's look at an example. Picture, clyde, clyde is a budding young farmer, who has developed, quite the green thumb working, for other people. Recently, his uncle, left him a piece of land. It's got great soil, and clyde is thinking of starting his own small farm there, allowing him to provide for his family, and his community. Now the machines, shouldn't be too expensive. But their price tags stand between, clyde, and his goal of starting the business. And obviously he can't start that business until he actually has equipment, to farm. Clyde has not owned his own business before and hasn't established, his credit, so it might be hard for him to get a bank loan. A micro, loan might be a good choice for him. Micro loans are just like they sound, they are usually smaller. Than traditional, business loans from banks, and they usually have shorter, terms, meaning you have to pay them back more quickly, that reduces, the risk, for the bank or. Not the bank. The actual micro loan provider. They can be good options, for very small started businesses, but you have to qualify, for a micro loan, and they typically, come with higher interest, rates so essentially, you're paying more for the loan. Even if you are starting your business from the ground up you may still need to demonstrate, that you have some, type of experience, in your industry. Such as being an employee at another, similar business. Clyde has that here remember, when i was explaining, who clyde was, you knew that clyde actually had experience. In, the field of farming but just hadn't owned his own business before, this will work in clyde's favor, because, the person providing, the micro or the organization, providing the micro loan, will be a little bit more confident, in clyde, knowing that he has experience, in this industry. Your personal, credit will typically be checked with a micro loan and you'll have to explain any negative information, on it, you may, also, have to offer, collateral. Which i talked about a little bit earlier. Which could be something like a personal vehicle, or a home, or business collateral, that you might have maybe you have a piece of real estate for the business. Or equipment, that you can put up as collateral. Or you may have to have what's called a cosigner. A cosigner, is someone, that guarantees, you personally. So in the event that you couldn't pay the loan the co-signer. Would then become responsible, for the loan. While lots of people have great business ideas, they might not know what it takes to actually, run a business, many micro lenders, offer advice. Resources. And expertise. As well as funding to help people develop business plans. There are even micro lenders who will work with you to create a plan that helps your business grow in stages. That way you can help your organization, to the point that more traditional, lenders, like banks will be open to you. Even if you don't have a full business plan, many micro lenders want to see that you are competent, and motivated. So know some details about your market, your potential customers. And why you need funding, to succeed. In clyde's, case clyde might talk about, his experience. In farming, how he's been successful, working. For, other. Companies within this industry. You'll also want to have a plan for paying back your loan remember what i said about getting too deep into debt, and not being able to pay back that loan, that can make. Growing, your business, a really big uphill climb and we want to avoid that. Many micro lenders are associated, with non-profit. Groups that help certain types of businesses. So look for one that actually matches your particular, situation. To find a micro lender, look at an online, search portal, like, the association, for enterprise opportunity, or microfinance.
Gateway. Or look for information. At. Sba.gov. Different micro lenders can place specific restrictions. On what you can or can't do with the proceeds, of your loan, so make sure that you understand, what a specific, micro lender offers, before, going, with them, make sure that they are going to give you a loan that's actually going to help you with what you need the loan for. While a micro, loan can seem like the easier way to go you still might be better off looking for a traditional. Which, often has lower interest rates. As a first step, put together all the materials, you need to approach several banks or other lenders the materials, that we talked about in today's workshop. And if you're unable, to then get a traditional, business loan, then consider, applying for a micro. Micro loan remember these micro loans are typically, higher, interest, rates. And, typically, shorter, term. So, you're going to have more pressure of paying back the loan more quickly. And you're also going to spend, more money on the actual loan in the form of interest. Let's do a quick recap of the workshop, and talk about, your next, steps. First, understand, there are different options, for funding your business today we talked about micro loans, and traditional, business loans in part two we're going to be talking, about, investors. Then you want to determine how much money your business actually needs you want to be really clear about this because you don't want to be spending, interest, on a loan that you actually don't need, you want to make sure it gives you exactly what you need and you're going to have no problem paying it back. After that you'll decide what funding path is best for you, in, either, case start to gather information, and create your loan packages. At the end of the day when you create your loan package, it's also going to have a lot of valuable. Information, about your business for you it's going to help you to do long-term, planning. It will also help you with your taxes. If you want to sharpen your business and marketing skills check out primer. This is a free app that you can download to your phone, this has a series of short fun lessons they're all less than five minutes each. This slide shows the lessons. The lesson titled put money into your project, getting a small business loan, so if you're interested, in this information, check out this workshop, as well. Another great resource. Is our quick help videos, get answers and learn how to make the most of google's tools in just a few minutes. You'll learn things like how to get your business listed on google search and maps, how to get a youtube channel for your business, and how to start a google me conference. You can check out the playlist, on g, dot co. Slash, grow. Quick help. If you're interested, in attending part two of this workshop. Remember, it's all about. Visit, g, dot co, slash, grow, on air, if you want to learn and explore more digital, tools. Visit google.com. Grow. This wraps up the presentation. Portion of today's workshop, now give us just a few minutes to pass things off to the seam who will answer some of the questions, that you submitted, throughout today's. Session. Thanks anna, hey everyone, i'm bossine, i'm so excited to be answering a few of the questions. That you've asked throughout today's session and we received, quite a few. I remember, if we don't get your questions we'll be going back and answering, all the questions. On the growth google on-air page, below the virtual event shortly, after it concludes. All right so let's get to our questions. All right the first question here is from sven. Um. And, he wants to know what if i have bad credit, that's a great question sven um so bad credit.
Could Prevent you from getting certain types of loans, uh most often those traditional, business loans. Uh the bank, of course relies, on your credit to be sure you will pay them back. Um short you know, on time. However when you. Don't you don't have little to no credit. You can always look into the option of micro loans. Due to the nature of microloans. And the increased, risk. For these lenders these loans are typically, paid back. Uh much more quickly. And can also carry higher rates so really just understand that as well um if you cannot get a loan, because your credit, then you can try maybe getting a loan from friends and families, loved ones, or even try something like you know crowdsourcing, or crowdfunding. All right for that. Uh next question, here is from, jill, h. Uh do you recommend, self, funding, or getting, funding, from banks. Or investors. Well this is actually going to be up to you. Of course if you have the money to sell fund your business, without, any worries, uh, you know for finance, then it may make sense to of course cell fund versus borrowing money. And then paying interest on top of that. Uh but. You. I really i would probably just have a conversation, with your tax professional. Because there actually may be, some financial benefits, to borrowing money but like i said talk with a professional. Have that discussion, to see if maybe borrowing money may be more beneficial, for your business in the long run. Next question here is from andrea. R. How much interest, do i typically pay, or have to pay on loan. Uh so your interest rate will actually vary depending on several factors. Uh, the it will. Mainly. Be on the actual current interest rate that's being offered by banks, and it's kind of a fluctuating, rate all the time. And also, other factors like we talked about your your credit score that's going to impact that as well, uh so typically, the. Less risk for the bank, the lower your interest rate will be but you can always check, there are actually several. Interest, rate um, calculators, or interest rate. Sites out there so definitely check those out uh to get an idea or where you would stand on that. The next question here is from greta. Do you recommend, a loan, even if i'm not sure. My business will take off. Uh well this will actually depend on the loan type, so for like a micro loan you'll be required to pay back the loan pretty quickly. So this is best for things like acquiring inventory. That you're fairly certain you're going to, be able to sell off in a certain time. So to minimize, your risk you want to try testing out your business ideas with, like a small or a soft launch. By self-funding. Right if you can sell fun or maybe get borrow some money from family members, in the beginning. Just to be sure that your business idea, is actually viable. And then when you actually have, a successful, business that you're looking to expand. And you need an invest, investment for that. You'll be more certain. Of your business success. And your ability to pay off that actual loan. All right, next question, here, is from, step. Up. I've been in business for seven years do i need a business plan. To get a loan. To upgrade my equipment. Well um, when it comes to acquiring, a business loan, the more information, you can provide the better, uh maybe a business plan. Isn't required, but it definitely, wouldn't actually, hurt, uh it's always, it's always good to even just have a business plan to kind of map out your business. Where it is and where you're looking to take it so, i like to kind of think of it as a plan for the future, so lay out that plan. And then you have a better idea really where you want to go with this this business. And it also just looks more professional. In the eyes, of, your potential, lenders. All right, well. That's, it that wraps up our q a for today. Thank you all for joining us today for learn about investors. And loan options for your small business, part, one, hopefully everyone, learns something new, uh you can find all of our follow resources, on the same page you're watching in the resources, tab, above the video player, you can also access recording, of today's session by clicking, on demand. At g dot. Grow, on air, i will also be sending a follow-up email with a survey for you to fill out regarding, your experience in the virtual workshop today. It's really important to get that feedback so we can quickly, improve. These sessions, and offer content that's most helpful to our learners. So thanks again for joining us today, uh don't forget you can sign up for part two of this workshop. On the growth google honor, page. We hope to see you next time, take. Care. You.