Are you creditworthy? Facilitator: Rayshonia “Ray” Manuel

What is credit? Credit is the extension of financial resources by one party to another party with an agreement to re-pay the funds over a set period of time. (With interest!!) 2

A consumer report or credit report. A credit report contains information about your credit history, personal data, past re-payment ability and general public information. Credit is granted on the condition that the historical information mentioned above is satisfactory. 3

What is on my credit report?  Personal Information −Name −SSN −Address −DOB −Employment information  Trade information −Account History  Public information −Judgments −Liens  Inquires 4

Credit Scoring Credit scoring is a mathematical system used to determine whether to approve or deny potential credit. The numerical system also tells potential creditors the likelihood of derogatory accounts. Credit scores are based on payment history, amount of high credit extended and debt to income ratio. 5

What does credit mean to small business owners? 1.Small business loans are based on the business owner. 2.Know and understand your personal credit before considering a small business. 3.Pay all personal bills on time. 4.Debt to income ratio. 5.Have a solid business plan with realistic projections. 6

How do I obtain a small business loan?  Good Character  Adequate Cash flow  Access to Capital  Collateral(if required)  Good Conditions The 5 C’s of Credit 7

Cash Flow  Does the business have strong cash flow(existing) are the projections substantive enough to support the loan requested. (start-ups)  Questions to ask yourself −Does my business plan demonstrate the ability to repay the loan? −Are my numbers realistic? 8

Character  What is the integrity of the company owners or managers?  Questions tto ask yourself −Am I capable of managing a business? −Do I have a history of money problems and have they been resolved? −Is my business start-up or expansion? 9

Capital  If it is an existing business is there enough equity in the business to absorb losses?  Questions to ask yourself −Am I willing to commit my money to the business? −Am I willing to take a risk for my business? 10

Collateral  Is there enough cash flow available to service the debt?  Are the assets used enough to satisfy the bank obligation?  Questions to ask yourself −What do you need the loan for? −How much do you need? −How will I pay the money back? −And finally, How will I pay the money back? 11

Conditions  What is the current status of the economic environment?  How will economic conditions affect the success of the business?  Questions to ask yourself −What is my niche? −If I saw this type of business would I uses the products and or services? −What about the business would keep me coming back? 12

Questions????? Women’s Business Center Women’s Center of Fayetteville 230 Hay Street Fayetteville, North Carolina Funded in part through a collaborative agreement with the US Small Business Administration 13