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Nebraska Business Development Center

FAQs

Frequently asked questions

Q: How do I get one of your loans?

A: First of all, NBDC does not loan money. The NBDC is your best source for professional, experienced business counseling that can help you evaluate the soundness of your business idea, refer you to different potential financing sources, and recommend systems and procedures that can help your new or existing venture on the path to success.

Under certain circumstances, the U.S Small Business Administration (SBA), an agency of the federal government, will guarantee a percentage of business loans in the case of qualified small businesses. The guarantee is between the SBA and a bank or other lending institution. If you cannot repay the bank, the SBA makes good on your loan, and your personal indebtedness shifts to the Federal Government. For more information, see your nearest NBDC office.

Q: Are there grants available for small business owners?

A: No! Certain publications have perpetuated the myth of "free money" and it is a shame that so many people approach new ventures with this expectation. With the exception of rare scholarships and contest awards, the only grant money available is the government’s competitive program (Small Business Innovation Research or SBIR grants) for scientific research and development. The harsh reality is: 95% of new businesses are financed with persona funds (savings, family, friends). Those who are eligible for financing, still must invent in their own venture and provide collateral. So, if you are serious about starting and growing a viable business, you must be resourceful enough to capitalize it without free money.

Q: How do I obtain a business loan?

A: It all depends on how much financing you need. If the amount you require is below $20,000 you’re looking at a personal loan, perhaps a local revolving loan fund (RLF), or a loan micro-loan fund. If the amount you need is above $20,000, you may also be looking at a local RLF or at a business loan. A business plan is generally required for a business loan or RLF loan.

A RLF is a loan program administered by a local economic development agency, the interest rate and repayment terms of which may be more advantageous than those available at a traditional bank. In any case, you must have an excellent credit history and adequate cash or equity collateral to secure the loan amount requested. If either requirement cannot be met, the only other options for a potential borrower are attracting a partner or cosigner with adequate collateral, private investors (also known as venture capitalists), or family and friends.

Family and friends are an option, but, generally speaking, should be considered only if all other options fail. If it turns out that your business does not succeed, and you owe substantial sums to family or friends, it could be costly in more than monetary terms. In any case, if you rely on family or friends for financing, take care to put the terms of any agreement in writing.

Another option is seller financing. If you are buying an existing business, the seller may allow you to over time, thus eliminating the need to come up with the entire cost of the business up front. Two quick tips would be not to let anyone rush you into a decision, and always establish a new business entity. You don’t want to inherit the previous owner’s liabilities.

Q: What types of documentation do I need to get a loan?

A: For an existing business:

  • Documentation of legal structure of the business (corporate or partnership documents)
  • Business plan
  • Business tax returns for the previous three years
  • Personal tax returns for the past three years
  • Current (within 90 days) financial statements including balance sheet, income statement, and cash flow statement
  • Last three years of financial statements including balance sheet, income statement, and cash flow statement
  • Personal financial statement of all owners with 20% or more ownership
  • Personal financial statement of any cosigners
  • Pro Forma cash flow statement for three years - done on a monthly basis and pro forma income statement and balance sheet for three years
  • Sources and uses of funds
  • An aged listing of all accounts payable and accounts receivable
  • A complete resume of your qualification for the type of business for which you seek financing
  • List of assets offered for collateral including legal descriptions of real start
  • Complete and accurate credit report

If you are starting a business you will need:

  • Documentation of legal structure of the business (corporate or partnership documents)
  • Business plan
  • Personal tax returns for the past three years
  • Personal financial statement of all owners with 20% or more ownership
  • Personal financial statement of any cosigners
  • Pro Forma cash flow statement for three years - done on a monthly basis and pro forma income statement and balance sheet for three years
  • Sources and uses of funds
  • List of assets offered for collateral including legal descriptions of real estate
  • A complete resume of your qualification for the type of business for which you seek financing
  • Complete and accurate credit report
  • List of assets offered for collateral including legal descriptions of real estate
  • Complete and accurate credit report

If you are buying an existing business you will need:

  • All the above listed under existing business plus
  • A signed purchase agreement

Q: I need to refinance an existing loan. What are my options?

A: Refinancing existing loans are difficult at best. Generally the bank will not consider restructuring a loan unless difficult, unplanned economic conditions have caused the business to suffer cash flow problems. The SBA will consider guarantying refinancing loans provided the restructuring increases cash flow by 20% or more. SBA will only consider refinancing the loan at the participating bank if the borrower has never been more than 30 days past due on that note. If the borrower does not meet that criteria, than the only option the borrower has is to switch banks and consider a SBA guaranty. Note: SBA will not refinance existing SBA guaranteed loans.

Q: How much do you charge for your services?

A: There is no charge for basic services offered by NBDC. Basic services include business plans and loan packaging. Fees may be collected, however, to recover specified client-approved charges for such items as copying, resources, and postage. A fee may be charged for in-depth marketing plans, research, feasibility studies, surveys, and strategic plans. Generally there is no time limit on cases, provided the client is participating in the process.

Q: How about confidentiality?

A: All client information discussed by the client with NBDC personnel is confidential. NBDC consultants are required to sign confidentiality statements and cannot discuss proprietary information about your business with anyone other than NBDC personnel or persons you so designate.