Steps in starting a new business The Kentucky Small Business Development Center of Louisville is a consortium consisting of the Louisville Metro Department for Growth and Innovation, the Kentucky SBDC network, and the U.S. Small Business Administration. Louisville SBDC 614 West Main Street, Suite 6000 Louisville, KY 40202 Phone: 502-625-0123 www.ksbdc.org/louisville 1. Consult with a licensed Kentucky attorney, a CPA, and/or an SBDC consultant to discuss your options and to determine your needs. 2. Select a business name and choose an operating legal entity (Sole Proprietor, Partnership, Corporation, LLC). 3. Register your business with the Kentucky Secretary of State. Secretary of State 700 Capital Avenue, Ste. 152 Frankfort, KY 40601 502.564.2848 (One Stop Business Licensing) 502.564.5687 (fax) www.sos.ky.gov If you incorporate you must submit Articles of Incorporation. If you are an LLC or LLP, you must submit Articles of Organization. Forms can be downloaded and printed from Secretary of State s web page: http://sos.ky.gov/pages/default.aspx. Filing Fee = $50.00 The Kentucky Economic Development Guide: http://businessclimate.com/kentucky-economic-development/magazine 4. Secure a license/certificate of occupancy. Jefferson County listed below. Similar in other counties in KY. a. Secure permits for any remodeling or new construction. b. Secure sign permits for any exterior signage. Jefferson County Code Enforcement Office 531 Court Place, Suite 301 Louisville, Kentucky, 40202-3391 502.574.5000 5. Obtain a federal employer identification number (EIN) from the IRS form SS-4. To request an SS-4 call: (800) 829.4933 or fax: (859) 669.5760 (Cincinnati Office) Detailed information on the electronic SS-4 at http://www.irs.gov/businesses/small/index.html and http://www.irs.gov/uac/form-ss-4,-application-for-employer-identification-number-(ein). To complete the form visit this page: http://www.irs.gov/pub/irs-pdf/fss4.pdf The IRS also has a district office in Louisville: Ron Mazzoli Federal Building 600 Martin Luther King Jr. Place Louisville, KY 40201 6. Obtain city and county occupational/business licenses. If in Jefferson County contact:
Louisville Metro Revenue Commission 617 West Jefferson Street Louisville, KY 40202 502.574.4860 www.metrorevenue.org Application form can be downloaded from web site at http://www.louisvilleky.gov/revenue/forms.htm Registration online is accessible at https://www.metrorevenueservices.org/registration/ Check with County Clerk if outside of Jefferson County for any local business taxes or licenses. Name Registration if in Louisville/Jefferson County: Jefferson County Clerk: 527 W. Jefferson Louisville, KY 40202 502.574.4900 http://www.jeffersoncountyclerk.org/ Cost is $15.00 in Jefferson County Name should be registered in each county business is conducted. Call the applicable county clerk s office for registration and other requirements. Check for any additional occupational / business taxes for micro-governments (St. Mathews, Shively, Jeffersontown, etc ) The Economic Growth and Innovation Department enhances the "Louisville" quality of life by encouraging quality development and supporting new and expanding businesses. They interact with developers, residents, businesses, attorneys, and other governmental agencies and utility companies in the approval process. 444 S. 5 th Street, Suite 600 Louisville, KY 40202 502.574.4140 http://www.louisvilleky.gov/economicdevelopment 7. Register with the Kentucky Department of Revenue (form 11A100 or 10A101): a. If you must collect sales or use tax. b. Any business with employees. c. Any business entity other than a sole proprietorship that doesn t collect sales or use tax or have employees. Kentucky Revenue Cabinet Kentucky Revenue Cabinet Louisville Branch 200 Fair Oaks Lane 502.595.4512 Frankfort, KY 40620 http://revenue.ky.gov/contact.htm Forms can be downloaded and printed from the KY Revenue Cabinet homepage at www.revenue.ky.gov, then click on Tax Forms or Business in the left margin. 8. If you have employees, do the following: a. Register with the Kentucky Department of Employment and Training at www.oet.ky.gov. Choose Unemployment Insurance then Employer Account Registration. This is to register with the state unemployment insurance (required for businesses with employees). b. Purchase workers compensation insurance from an independent insurance agent. c. Report the name and social security number (SSN) of each new hire to the Kentucky New Hire Reporting Center, 1-800-817-2262. 9. Check with the KY Business Information Clearinghouse at 1.800.626.2250 and your local city and county clerks to determine if any special licenses are required for your business. A great resource is the One Stop Business Portal for licensing, permits, registration, insurance, etc. at http://onestop.ky.gov/start/pages/default.aspx. 10. Establish a business checking account. You will need your State and Federal numbers to do this. Consider a business savings account. 11. Secure liability insurance and other coverage appropriate for your business.
Start Right How SBA Can Help Your Business Survive and Grow How To Festival Louisville Free Public Library May 10, 2014
American Proverb The Best Things in Life Are Free and so are SBA services
SBA Mission The SBA helps Americans start, build and grow small businesses in the U.S. Started in 1953 Network of offices & partnerships Public and private organizations
SBA Programs Capital Loan guaranty programs Contracts, Exporting and Grants More opportunities for small business Counseling Free resources to help small business
Ready or Not. As the business owner, you must manage: Revenue (marketing and sales) Expenses (budgeting and finances) Teambuilding (recruit and retention) Professional development (training & succession)
Small Business Needs Honest self-assessment (introspective) Take charge person (leadership) Support from family & friends (empathy) Wear many different hats (flexibility) Work 60+ hours weekly (commitment) A detailed written plan (preparation)
Step 1 Acid Test Are you really committed? Have you done homework? Market research Public / University library Business associations Publications / Journals Competition
Step 2 Your Team Passion for the business Loyalty to the business Honesty and openness Versatility Connected to the community Flexibility
Step 3 Your Vision How are you different? Missions, Vision and Value Statements Where do you want to be? Develop a 3 5 year horizon
Step 4 Legal Structure 5 common legal entities in Kentucky Sole proprietorship Partnership S-Corp C-Corp Limited Liability Co. (LLC)
Step 5 Regulatory / Licensing Federal State www.irs.gov www.thinkkentucky.com Local (city and local-local ) http://onestop.ky.gov/start/pages/localreq uirements.aspx
Step 6 Advisory Board Attorney Accountant/CPA Lender (bank or credit union) Insurance broker Marketing expert (social media) Industry mentor
Step 7 Business Plan Executive summary Overview Marketing plan Operations/Logistics Your team Financial plan Appendix
Step 8 The Money Character Capacity Capital Collateral Conditions
Financing Options Lines of credit Commercial loans SBA loan guaranty programs Investors Credit cards
SBA Loan Guaranty Programs 7(a) program Working capital, inventory, land, building, equipment, etc. 504 program Land, buildings, durable equipment Microloan program Loans up to $50,000
Small Business Counseling Free, confidential, one-on-one Small Business Development Center (SBDC) SCORE Women s Business Center of KY Veterans Initiative: www.kyvetbiz.com
Louisville SBDC
SCORE Louisville
Women s Business Center of KY
KyVetBiz.com
Words of Advice Use these free resources Have a plan.and follow it Surround yourself with experts Learn about budgets Build and maintain a good team Stay informed
SBA Counseling Programs Small Business Development Center 614 West Main Street, Louisville, KY; (502) 625-0123 http://ksbdc.org/louisville SCORE - Louisville 600 Dr. M.L. King, Jr. Place, Room 188; (502) 582-5976 http://louisville.score.org Women s Business Center of KY 811 S. 2nd Street, Louisville, KY; (502) 992 9495 www.wbcky.org
Questions?
How Can SBA Help You? Thank You! Michael Ashcraft michael.ashcraft@sba.gov (502) 582-5971 Ext. 225
QUICK REFERENCE TO SBA LOAN GUARANTY PROGRAMS Program Maximum Loan Amount Percent of Guaranty Use of Proceeds Maturity Maximum Interest Rates Guaranty Fees Who Qualifies Benefits to Borrowers 7(a) Loans Standard 7(a): SBA approved Preferred Lender Program (PLP): Lender approved Loans $350,000 or less are processed using the Small Loan Advantage (SLA) model referenced in SOP 50 10 5 F. SLA as a program expired 12/31/2013. $5 million gross 85% Guaranty for loans of $150,000 or less; 75% Guaranty for loans greater than $150,000 ($3.75 million maximum Guaranty to any one entity) Term Loan. Expansion/ renovation; new construction, purchase land or buildings; purchase equipment, fixtures, lease-hold improvements; working capital; refinance debt for compelling reasons; seasonal line of credit, inventory Depends on ability to repay and the Use of Proceeds. Generally, working capital & machinery & equipment (not to exceed life of equipment) is 5-10 years; real estate is 25 years. Loans less than 7 years: $0 - $25,000 Prime + 4.25% $25,001 - $50,000 P + 3.25% Over $50,000 Prime + 2.25% Loans 7 years or longer: 0 - $25,000 Prime + 4.75% $25,001 - $50,000 P + 3.75% Over $50,000 Prime + 2.75% Up-front fee charged on Guaranty portion of loan only Maturity: 1 year or less 0.25% Guaranty fee on loans over $150,000; Over 1 year: $150,000 gross amount or less = 0% for FY2014; $150,001 - $700,000 = 3.0%; Over $700,000 = 3.5%; 3.75% on Guaranty portion over $1 million. Must be a for profit business & meet SBA size standards; Show good character, credit, management, and ability to repay. Must be an eligible type of business. Prepayment penalty for loans with maturities of 15 years or more if prepaid during first 3 years. (5% year 1, 3% year 2 and 1% year 3) Long-term financing Improved cash flow Fixed maturity No balloon Notes No prepayment penalty for loans with original maturity under 15 years. Ongoing Servicing Fee of 0.52%. SBAExpress Lender approved under delegated authority $350,000 50% Guaranty May be used for a term loan (same as 7a) or for Revolving Lines of Credit Same as 7(a) Up to 7 years for Revolving Lines of Credit including term out period. Loans $50,000 or less = Prime + 6.5%; Loans over $50,000 = Prime + 4.5% Same as 7(a) Same as 7(a) Fast turnaround Streamlined process Easy-to-use Line Of Credit SBA Veterans Advantage Only processed under the SBAExpress delegated authority 01/01/14-09/30/14 $350,000 50% Same as SBAExpress Same as SBAExpress Same as SBAExpress Same as SBAExpress Up-front Guaranty Fee = 0% on loans up to $350,000 for FY2014 Ongoing Servicing Fee of 0.52% applies to loans $150,001 $350,000 Same as 7(a). In addition, the applicant must be: veteran, active-duty military in the Transition Assistance Program (TAP), Reservist or National Guard member or a spouse or widowed spouse of a veteran who died during service, or a service connected disability. No up-front Guaranty Fee for FY2014 Fast turnaround; Streamlined process; Easy-to-use Line Of Credit CapLines: 1. Working Capital; 2. Contract ; 3. Seasonal; and 4. Builders CAPLines SBA approved Community Advantage Mission focused lenders only $5 million Same as 7(a). Finance seasonal and/or short term working capital needs; cost to perform; construction costs; advances against existing inventory and receivables; consolidation of short-term debts. May be revolving. Up to 10 years, except Builder s CAPLine, which is 5 years Same as 7(a) Same as 7(a) Same as 7(a), plus all lenders must execute Form 750 & 750B (short term loans) 1. Working Capital -Revolving Line of Credit (LOC) 2. Contract - can finance all costs (excluding profit). 3. Seasonal - Seasonal working capital needs. 4. Builder - Finances direct costs with building a commercial or residential structure $250,000 Same as 7(a) Same as 7(a) Same as 7(a) Prime plus 4% Same as 7(a) Same as 7(a) Same as Standard 7(a) plus lenders must be CDFIs, CDCs or micro-lender targeting underserved market U.S. Small Business Administration 600 Dr Martin Luther King Jr Pl, Room 188 Louisville, KY 40202 Kentucky District Office (502) 582-5971 www.sba.gov/ky Information current as of January 1, 2014 SBA Programs and services are provided on a nondiscriminatory basis. See the SOP 50 10 5 (F) for the most up to date detailed information
QUICK REFERENCE TO SBA LOAN GUARANTY PROGRAMS Program Maximum Loan Amount Percent of Guaranty Use of Proceeds Maturity Maximum Interest Rates Guaranty Fees Who Qualifies Benefits to Borrowers International Trade SBA approved $5 million 90% guaranty (up to $4.5 million maximum guaranty) (Up to $4 million maximum guaranty for working capital ) Term loan for permanent working capital, equipment, facilities, land and buildings and debt refinance related to international trade Up to 25 years. Same as 7(a) Same as 7(a) Same as 7(a), plus engaged/ preparing to engage in international trade/adversely affected by competition from imports. Long term financing to allow small business to compete more effectively in the international marketplace Export Working Capital Program SBA approved $5 million 90% guaranty (up to $4.5 million maximum guaranty) Short-term, working-capital loans for exporters. May be transaction based or asset-based. Can also support standby letters of credit Generally one year or less, may go up to 3 years No SBA maximum interest rate cap, but SBA monitors for reasonableness Same as 7(a) Same as 7(a), plus need shortterm working capital for exporting. Additional working capital to increase Export sales without disrupting domestic financing and business plan Export Express Lender approved under delegated authority $500,000 90% guaranty for loans of $350,000 or less; 75% guaranty for loans greater than $350,000 Same as SBAExpress plus standby letters of credit Same as SBAExpress Same as SBAExpress Same as 7(a) Applicant must demonstrate that loan will enable them to enter a new, or expand in an existing export market. Business must have been in operation for at least 12 months (though not necessarily in exporting). Fast turnaround Streamlined process Easy-to-use line of credit 504 Loans Provided through Certified Development Companies (CDCs) which are licensed by SBA 504 CDC maximum amount ranges from $5 million to $5.5 million, depending on type of business. Project costs financed as follows: CDC: up to 40% Non-guaranteed financing: Lender: 50% Equity: 10% plus additional 5% if new business and/or 5% if special use property. Long-term, fixed-asset loans; Lender (nonguaranteed) financing secured by first lien on project assets. CDC loan provided from SBA 100% guaranteed debenture sold to investors at fixed rate secured by 2nd lien. CDC Loan: 10- or 20-year term fixed interest rate. Lender Loan: (unguaranteed) financing may have a shorter term. May be fixed or adjustable interest rate Fixed rate on 504 Loan established when debenture backing loan is sold. Declining prepayment penalty for 1/2 of term..5% fee on lender share, plus CDC may charge up to 1.5% on their share. CDC charges a mthly servicing fee of 0.625%- 1.5% on unpaid balance Ongoing guaranty fee (FY 2012) is 0.9375% of principal outstanding. Ongoing fee % does not change during term. Alternative Size Standard: For-profit businesses that do not exceed $15 million in tangible net worth, and do not have an average two full fiscal year net income over $5 million. Owner Occupied 51% for existing or 60% for new construction. Low down payment - equity (10%-20%) (The equity contribution may be borrowed) Fees can be financed; SBA Portion: Long-term fixed rate Full amortization No balloons Non-7(a) Loans - SBA Microloans Loans through nonprofit lending organizations; technical assistance also provided. $50,000 Not applicable Purchase machinery & equipment, fixtures, leasehold improvements; finance increased receivables; working capital. Cannot be used to repay existing debt. Shortest term possible, not to exceed 6 years Negotiable with intermediary. Subject to either 7.75 or 8.5% above intermediary cost of funds. No Guaranty Fee Same as 7(a) Direct loans from nonprofit intermediary lenders; Fixed-rate financing; Very small loan amounts; Technical assistance available U.S. Small Business Administration 600 Dr Martin Luther King Jr Pl, Room 188 Louisville, KY 40202 SBA Answer Desk 1-800-827-5722 www.sba.gov Developed by Kentucky District Office (502) 582-5971 January 1, 2014
Sample Business Plan Outline The business plan describes the idea of a company s past, current and future operations. The business plan can be a request for an investment or loan. The most important function of a business plan is to communicate the company s goals and the experience of the management team, and the business plan is used to guide the company. 1. Cover Page Use a cover page that includes the name and address of the business and the principals. Include a company logo if available. 2. Executive Summary Write a summary of business plans. How will you start and what are your plans for the future? What is your legal structure? Sole proprietorship, Partnership, or Corporation Where will the business be operated? Home-based or retail location? 3. Business/Company Description Describe the business including details about your product or service. How will you market your product or service? Describe the manufacturing process? (If appropriate) Number of employees required, and what are their responsibilities? Describe your geographic location. Who are the owners and what is their experience? 4. Target Market Explain the need for your product or service. Describe your target clients in detail. Age, income, and location Describe their buying habits. Describe your direct and indirect competition. What do they do well? What do they do poorly? Explain the niche you will fill. Explain how you will be different. 5. Marketing Plan Explain how you will reach your target market. How will you get them to buy your product or service? Explain your advertising plan with budget & one-year calendar of ad placement. Explain your client follow-up procedures. 6. Operational Plan Explain the day-to-day operations of your business. Who does what & when? Explain employee duties. What are the hours of operation? How & when will you use professional services such as accountants and lawyers? 7. Financial Plan Explain your need for and use of loan proceeds. Include an equipment list. Include a cash flow projection covering the term of requested loan. Explain how income projections were determined. Explain employee salaries and owner s draw. Explain mark-up and profit. Explain owner s equity and collateral. 8. Supporting Documents Includes resumes of all owners, copies of licenses, permits & leases, personal & business tax returns, and samples of advertising pieces, such as flyers or ads.
SBA Resources to Fit Your Needs Kentucky District Office Mazzoli Federal Building 600 Dr. M.L. King Jr. Pl. Room 188 Louisville, KY 40202 502-582-5971 www.sba.gov Your Small Business Resource Every day, the U.S. Small Business Administration and its nationwide network of partners help millions of potential and current small business owners start, grow and succeed. Resources and programs targeting small businesses provide an advantage necessary to help small businesses effectively compete in the marketplace and strengthen the overall U.S. economy. SBA offers help in the following areas: Starting a Business Financing a Business Growing a Business Opportunities in Contracting Recovering From Disaster A Voice for Small Business in Government Visit SBA online at www.sba.gov for 24/7 access to small business news, information and training for entrepreneurs. All SBA programs and services are provided on a nondiscriminatory basis. No matter where you are on the road of small business ownership, you re only a phone call or a computer click away from the U.S. Small Business Administration and the help it can provide. The SBA offers programs and services for start-ups, established or growing enterprises, lenders, and for homeowners, renters, non-profit organizations and businesses of all sizes in times of a declared disaster. As Your Small Business Resource, the SBA can connect you with a network of services to fit your needs. The SBA also actively voices small business concerns with Congress and federal agencies about government regulations, taxes, health care and more. Click on our Web site or call our number for details. Here s how the SBA and its partners can help you. Starting Your Business Develop a business plan Complete loan applications Ask about target programs for women, veterans, Native Americans, and socially and economically disadvantaged citizens Financing Your Business: Detailed information about an SBA 7(a) loan guaranty of up to $5 million for working capital, real estate or fixed assets Surety bond guaranties of up to $6.5 million for eligible small contractors Export marketing guidance and trade finance assistance Growing Your Business: Direct access to more than 40 online business universities and colleges One-to-one and online counseling from SBA partners such as the SBDC, SCORE and the Women s Business Center Management and technical assistance available at 17 SBDC and 11 SCORE offices located throughout Kentucky Contracting Opportunities: The Small Disadvantaged Business Certification Program, which certifies small disadvantaged businesses eligible for federal contracts Establishment of federal contract award preferences for businesses located in historically underutilized business zones (HUBZones) Qualification for higher SBA-guaranteed surety bonds on construction and service contract bids for eligible HUBZone-certified businesses
Recovering From Disaster: When the President or SBA Administrator declares a disaster, homeowners, renters and businesses of all sizes may apply for low-interest SBA disaster loans. Real Property Loans Loans up to $200,000 for homeowners to repair or restore a home to its previous condition Personal Property Loans Up to $40,000 for homeowners and renters to repair or replace personal property such as clothing, furniture or automobiles lost in the disaster Loans for Businesses Physical Disaster Loans For non-farm businesses of any size and non-profit organizations. SBA makes loans of up to $2 million to repair or replace damaged property, inventory and equipment. Economic Injury Disaster Loans Small businesses or agricultural cooperatives may be eligible for SBA assistance if they have suffered substantial economic injury in a declared disaster area, regardless of physical damage. Military Reservist Economic Injury Disaster Loans Loans of up to $2 million can help small businesses sustain operations when an essential employee or owner is called to active duty as a military reservist. Your Voice in Government: SBA s Office of Advocacy serves as principal resource for small business statistics and monitors small business trends Advocacy monitors regulatory and other policy proposals of more than 20 federal agencies for impact on small businesses Office of National Ombudsman coordinates 10 regional regulatory fairness boards which receive comments about federal regulations affecting small businesses. KENTUCKY DISTRICT OFFICE: 600 Dr. Martin Luther King Jr. Place, Room 188, Louisville, KY 40202 Tel.: 502-582-5971 Fax: 502-582-5009 TDD: 502-582-6715 Website: www.sba.gov/ky SERVICES AVAILABLE Financial assistance for new or existing businesses is available through guaranteed loans made by area bank and non-bank lenders. Special loan programs are available for businesses involved in international trade. Free counseling, advice and information on starting, better operating or expanding a small business through SCORE, Small Business Development Centers (SBDC) and the Women s Business Centers (WBC). A Women's Business Ownership Representative is available to assist women business owners. A Veterans Affairs Officer is available to assist veterans. Assistance to businesses owned and controlled by socially and economically disadvantaged individuals is available through the Business Development Program. SBA also conducts training events throughout the state. Some training events require a nominal registration fee.
Understand how to build your credit score Reprinted on January 10, 2011, courtesy of Yes, You Can. For more information, please visit www.yesyoucanonline.info. Many Americans don t realize the importance of their credit record, yet it s something that is critical to their daily lives. Your credit record is especially important when it comes to making big purchases like a house or car. If you don t have a good credit history, you may be forced into a loan at a very high interest rate... that is, if you are able to secure a loan at all. What makes up your credit score? Credit scores are used to rate the information in your credit report. They are calculated much like a traditional report card and are weighted based on a number of factors. There are many different credit scores with a variety of ranges. One of the most recognized is produced by FICO and has a range of 300 (for someone with poor credit) to a perfect 850. Here s approximately how it breaks out: 35 percent of the score is based on your payment history. Paying your bills on time is crucial to a good credit score. On the other hand, if you ve paid your bills late, filed bankruptcy, or have received collection notices in the past, your score will be negatively impacted. 30 percent is based on outstanding debt. This portion is impacted by the total number of loans you have outstanding such as your home mortgage, a car loan, any student loans or credit cards and the balance on those loans. 15 percent is based on the length of time you ve had credit. The longer you ve established credit, the better it is for your overall score. 10 percent is based on new credit. This means you ll be penalized if you ve opened too many credit card accounts in the last year, or even if you ve had too many inquiries into your credit record. 10 percent is based on the type of credit you currently have. This refers to various types of credit such as installment loans (like an auto loan), a revolving credit card account and a home mortgage. Even though there are many factors which can impact your credit score, here are three simple ways to build good credit: 1. Pay your bills on time; 2. Eliminate outstanding balances on credit cards, since high debt can negatively affect your score; and 3. Don t open new credit card accounts if you don t absolutely need them. Maintaining good credit can mean an enormous difference in what you ll pay in interest rates over the years. According to myfico.com, a 100 point difference in your credit score could mean paying more than $40,000 in extra interest payments over the life of a 30-year mortgage on a $300,000 home loan. To help you track your credit record, review your credit report regularly and monitor your activity. To get your free annual report click here. Credit history Equifax 800-997-2493 Experian 800-916-8800 TransUnion 800-397-3742 www.annualcreditreport.com