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ACCION Texas

ACCION Texas. Financing your Business During Tough Times . ACCION TEXAS . Non-profit agency, established in San Antonio 1994 – the largest micro lender in the Country

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ACCION Texas

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  1. ACCION Texas Financing your Business During Tough Times

  2. ACCION TEXAS • Non-profit agency, established in San Antonio 1994 – the largest micro lender in the Country • The mission of ACCION Texas is to provide credit to small businesses that do not have access to loans from commercial sources. Through its loans and services,  ACCION Texas helps microentrepeneurs strengthen their business, stabilize and increase their incomes, create additional employment and contribute to the economic revitalization of their communities.

  3. ACCION TEXAS Staff Introduction • Shirley Brooks – Regional Director • I have worked for ACCION for 7 years • Year-to-date we have loaned out over $1.9M • Telephone (1-866-312-3774) • 7100 Regency Square, Suite 103, Houston Texas 77036 • Website (www.acciontexas.org) • Bridget Ross - Loan Officer

  4. Disaster Recovery Loan for Small Businesses 2% • Existing Businesses affected by Hurricane Ike • Maximum Loan amount is $5000.00 • Flexible on Collateral • Proof of having a business and bank statements • Not Credit Score Driven

  5. This is NOT the time for Knee jerk reaction regarding your Business Financials: • How we handle money impacts our personal lives and our businesses • A Checkbook is a theological document; it tells you who and what you worship. Billy Graham

  6. Surviving the Tough Times • Analyze Your Situation • Set Financial Goals for Your Money • Create a Budget for your Personal Lives and Business • Develop a Banking Relationship • CPA, Insurance Agent, and Attorney

  7. GOALS WORKSHEET Short Term Cost Target Date Monthly (up to 1 year) Television $300.00 6 months $50.00 Mid TermCost Target Date Monthly (1 - 5 years) Vacation $1000.00 18 months $55.55 Long TermCost Target Date Monthly (5+ years) Retirement $100,000 30 years $277.77

  8. Finding Money for Your Business During Tough Times • Personal Saving (this is a primary source of funding for micro-businesses) • Friends and Family • Banks (this is the most common source of funding) • Alternative Lenders (ACCION) • Venture Capitalist Group • Factoring (ACCION)

  9. Underwriting Guidelines for Credit • Capacity - (please see Monthly Financial Sheet) – This is by far the most important element in determining your ability to repay the loan. A business ability to prove it can cash flow is demonstrated on the financial sheet hand out.

  10. Ability to Repay MUST be: Unquestionable!

  11. Capacity • If start up or existing business - not able to prove cash flow then an alternate source of income is required. • Financials are Required (Tax Returns, P&L’s, Balance Sheets, and Bank Statement) • Debt-to-Income .50 (including new loan) • 30-40% of your available revolving credit • Liquidity (your investment into the business

  12. NET MONTHLY INCOME First Salary. . . . . . . . . . . . . . . . . . $_________ Spouse’s Salary. . . . . . . . . . . . . . $_________ Part-Time Job. . . . . . . . . . . . . . . .$_________ Child Support. . . . . . . . . . . . . . . .$_________ Other. . . . . . . . . . . . . . . . . . . . . . .$_________ TOTAL NET MONTHLY INCOME $________

  13. EVALUATE TOTAL MONTHLY INCOME • Determine take home pay • Examine other income sources

  14. NEEDS VERSUS WANTS

  15. WHAT IS CREDIT? • Definition • Credit worthiness • Capacity judged by earning power and current financial commitments • Character determined by honesty, reliability, willingness to pay • Collateral measured by financial resources • Income, home equity, business or household goods, automobiles, life insurance, savings accounts

  16. Underwriting Guidelines for Credit • Bank Credit Score Requirement – 670 and above (please understand that they look at more then your score) • Age of Credit (Established Credit) • Type of Credit • Third party record of your financial history bottom line your credit report is a indication of your Character. How you pay others is probably how you will pay them

  17. ACCION Texas Credit Score Requirements for Loan Amounts: • 650 – You may apply for loan amount up to $100,000.00 (secured by land • 650 - $50,000.00 (Equipment, F&F, Vehicles 10 years are older) • 630 - $35,000.00 • 600 - $25,000.00 • 550 - $12,000.00 • 500 - $8000.00 under 500

  18. What Makes Up a FICO Score • Payment History - 35% • Balances Carried 30% • Credit History 15% • Mix of ACCOUNTS 10% • Inquires 10%

  19. DEVELOP BILL PAYING PLAN • Know payment amounts and due dates • Establish personal pay day • Determine set-aside expenses • Review Bill Paying Plan

  20. HOW TO PAY EXPENSES • Most expenses • Best paid by check, money order, online • Have good payment records • Some payments best handled by weekly cash basis • Research shows • People more conscious of spending paying cash • More likely to stay within pre-set limits

  21. CREDIT ADVANTAGES • Credit • useful in times of emergency • Sometimes easier and more convenient than cash • Allows you to make major purchases • Car • House

  22. CREDIT TERMINOLOGY • Adjusted balance • Annual fee • Annual percentage rate (APR) • Average daily balance

  23. CREDIT TERMINOLOGY • Finance charge • Grace period • Other fees • Late • Over limit • Cash advance

  24. ESTABLISHING CREDIT • Open checking and/or savings account • Deposit amount of money in financial institution • Borrow against it with savings as collateral • Borrow reasonable amount of money • Make monthly payments • Pay bills on time

  25. COST OF CREDIT • Effects of minimum payment • Borrow $1000 @ 22% • Minimum payment $20 • Interest $18.33 • $1.67 goes to pay off debt • Total Repayment – $11,80.00 • Borrow $5000 @ 15.9% • Minimum payment approx. $110 • 343 payments • $7,129.01 interest • Total repayment - $12,129.01

  26. National Credit Repository • Equifax – www.equifax.com • Experian – www.experian.com • TransUnion – www.transunion.com • Fair Isaac Credit Score Hotline 800-777-2066 • Everyone is entitled to one free report a year.

  27. DEBT TO INCOME SAMPLE • Sample • Someone with gross monthly income $2,000 making minimum payments of $400 on debt (loans and credit cards) • debt to income ratio of 20% ($400 / $2000 = .20)

  28. DEBT TO INCOME STATUS • 20% or less: • In great standing • Eligible for low interest rate cards • 25% to 30%: • No trouble getting loans • 30% warning – too much debt • Reduce debt levels • affects house purchases, interest rates, car purchases

  29. DEBT TO INCOME STATUS • Over 35%: • Stop charging • Cut up your cards • Develop plan to get out of debt

  30. WHAT WOULD YOU DO? • Lose your job • Income reduced • Become ill, widowed, divorced • If debts go to collection agency • Communicate with your lenders (make arrangements)

  31. OPTING OUT • To stop receiving pre-approved credit card offers • Opt-out • 1-888-5-OPT-OUT

  32. CONSEQUENCES OF BANKRUPTCY • On credit report 10 years • Difficult to obtain credit • May not be hired • Pay higher interest rates • Destroys credit scores • May be viewed by others

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