above c average

Above C Average: Mastering the C’s of Lending

Accounting and

financial systems

Inventory Equipment

Security and Insurance

Marketing/Publicity

Hire More Employees

always on your mind….

funding sources

Factoring

Company

Mezzanine

Financing

Cash Flow Cycle

Cash In

Inventory

SALES

Accounts

Receivable

BANKS

Friends and

Family Credit Card Retirement

Funds

Micro Lenders

Capacity: Do you have the ability to repay the loan successfully?

(Debt to Income <50%)

Character: What is your background, experiences, and expertise?

Is your business related to that experience?

References are required.

Credit history: What does your credit history show?

Collection? Charge Off? Bankruptcy? Judgment?

Collateral: What type of assets can you pledge to secure the loan?

What items have you purchased for your business?

Commitment and motivation

To improve your business and improve your credit

Conditions: Do you have a clearly defined purpose of how the loan will be

used for your business?

How is the industry and economy doing?

What does your Business Plan look like?

the Cs of accessing capital

Where do you start in organizing your finances?

How does one measure capacity

• Recordkeeping plays a key role

– Provides Details and Reporting about your business

– Measure How your business is doing

– Show you if you are profitable

– Facilitate Tax preparation

• Every lending organization looks at:

– Your documentation

– Your bank accounts

• Deposits, Withdrawals, Non Sufficient Funds,

Large sums Deposited, and more!

– Your tax returns

7

Does it match up?

• From recordkeeping to validation of the actual dollars is important.

• BANK ACCOUNTS are important!!!!

• Tax RETURNS are important!!

8

Cash Flow:

• Universal Cash Flow

– Cash in/Cash out

– Both personal and business

• Debt to Income Ratio

– Healthy is under 25-35%

– When your DTI is between 40-50% your ability to carry debt is difficult

• Debt to Coverage Ratio

– ability to produce enough cash to cover all long term debt

9

Personal Credit Score

• Scores Range from 300 to 850. Some individuals may have limited or no credit score.

• http://www.myfico.com/crediteducation/WhatsInYourScore.aspx

What your score means

720+

•Excellent Credit

•Qualify for Lenders Best Rate

675-719

•Average Credit

•Qualify for 1 -2 points above best interest rate

620-674

•Below Average Credit

•Premium Interest rate

•More Documentation needed

<620

•Sub-Prime Borrower

•Risk based interest

Lets walk through a Credit Report!

– Personal Info

– Trade Lines

– Credit Inquiries

– Public Inquiries and Collections

How to Impact your Credit Score

• Yearly Free Credit Report

• Set up Payment Reminders

• Pay Down your Debt

• Get Current & Stay Current

• Communication is Key

• The Older the Better

Repairing Credit

• Step 1 – Contact the Bureau and the Organization

• Step 2 -Write a letter:

– Disputed item

– State the facts

– Request Deletion/correction

• Step 3 – Send via Certified mail

Fair Credit Reporting Act

• You have the right to know the following: – receive a copy of your credit report. – the name of anyone who received your credit report

in the last year – company that denies your application – free copy of your credit report when your application

is denied (within 60 days of denial notice). – Investigation if you contest completeness or accuracy

of report

• You have a right to ask for a summary explanation to your credit report

Equal Credit Opportunity Act

• You cannot be denied credit based on your race, sex, marital status, religion, age, national origin,

or receipt of public assistance.

• You have the right to have reliable public assistance considered in the same manner as

other income.

• If you are denied credit, you have a legal right to know why.

Debt Collectors

• Debt collectors may contact you only between 8 a.m. and 9 p.m.

• Debt collectors may not contact you at work if they know your employer disapproves.

• Debt collectors may not harass, oppress, or abuse you.

• Debt collectors may not lie when collecting debts, such as falsely implying that you have committed a crime.

• Debt collectors must identify themselves to you on the phone.

• Debt collectors must stop contacting you if you ask them to in writing.

Resources

• www.fico.org • www.freecreditreport.com • www.annualcreditreport.com

• Excel for Universal Cash Flow (Personal) • Score Templates

– http://www.score.org/resources/tab-a

• Calculators: – http://www.biz2credit.com/financial-calculators/financial-

calculators/debt-service-coverage-ratio-calculator.html – http://www.dinkytown.net/java/DebtService.html

• Simple Interest Calculator – http://math.about.com/library/blcompoundinterest.htm

Credit Reports

Credit Summary

• Knowing and managing your credit is vital.

• Personal Credit is heavily relied on for accessing capital

• Business Credit is secondary but also important.

• Together the two or one on its own allows for a reviewer to

better understand how they should determine your:

• Interest rates

• Your relationship for trade

• Your capacity for debt

• Your risk

• Your reputation.

p: 888.215.2373

e: lnavarro@accionlouisiana.org

w: www.acciontexas.org

acciontxinc

@Accion_TX