Resources

A step-by-step guide to
applying for an SBA loan.

An effective Small Business Administration loan proposal includes:

  • General Information:
    • Business name, name of principals, social security number of each principal, and addresses.
    • Loan purpose. State exactly why the loan is needed, and what it will be used towards.
    • Amount required. Request the exact amount needed.
  • Business Description:
    • History and nature of business
    • Give details of your business’ age, number of employees and business assets.
  • Management Profile:
    • Management description
    • Develop a short statement on each of the principal staff members in your business. Provide background, education, experience, skills, and accomplishments.
  • Market Information:
    • Clearly define your products and market, and identify your competition
    • Profile your customers and explain how your business can satisfy their needs
  • Financial Information:
    • Financial statements – Provide balance sheets and income statements for the past three years. If you are starting, provide a projected balance sheet and income statement.
    • Personal financial statement – Prepare a personal financial statement on yourself and other principal owners of the business.
    • Collateral – List all collateral you would be willing to pledge to the bank as security for the loan.
    • While the need for capital is your first consideration, without detailed plans, you may be taking yourself out of the game. Prudent financial planning and judgment are significant factors in the successful operation of your business. You lender can best serve you if you have a clear, understandable plan of action. Plan ahead!

Financial Ratio Analysis

LIQUIDITY RATIOS

current-ratio.jpg
The Current Ratio measures the number of dollars available to cover each dollar of current debt.

quick-ratio.jpg
Not all current assets are easily turned into cash. Since inventories are often the least liquid, the Quick Ratio excludes inventories to get a better measure of liquidity.

cash-ratio.jpg
Cash and marketable securities are the most liquid form of assets. The Cash Ratio measures existing liquidity.

ACTIVITY RATIOS

recievables-turnover.jpg
This ratio indicates the quality of accounts receivable and how successful the company is in collecting its receivables.

collection-period.jpg
In general, the average collection period should not exceed the time allowed for payment in the sales agreement.

inventory-turn.jpg

average-inventory.jpg
This ratio judges how efficiently the assets are being used to generate sales. A high ratio indicates the firm is operating close to capacity; a low ratio suggests the need for greater efficiency or disposal of some assets. Calculation of the ratio is influenced by the depreciation method used, and the higher cost of new assets.

PROFITABILITY RATIOS

gross-margin.jpg
This figure shows the percentage of net sales that is your gross margin, from which you must be able to meet expenses.

return-assets.jpg
Return on Assets provides a general measure of the firm’s profitability.

return-equity.jpg
This ratio considers the amount of earnings available to stockholders compared to their investment.

COVERAGE RATIOS

debt-equity-ratio.jpg
The Debt/Equity Ratio measures how well protected the creditors are in case of bankruptcy. It has a strong bearing on the ability of the firm to raise additional credit or other financing.

times-interest-earned.jpg
This measurement of financial leverage focuses on the ability of the firm to cover its interest expenses. The firm’s income must be able to cover interest on its debt.

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