SBA loans are small-business loans that are partially guaranteed by the U.S. Small Business Administration and issued by participating lenders, usually banks. Our SBA Business Plan meet the requirements by the SBA. Though these loans have tight lending standards, if you can qualify for an SBA loan, their flexible terms and low interest rates can make them one of the best small-business loans. An SBA loan can cover startup costs, working capital needs, expansions, real estate purchases, and more, and is issued by a private lender but backed by the federal government.

You apply for an SBA loan through a lending institution like a bank or credit union, which then applies to the SBA for a loan guarantee. Once you’re approved for an SBA loan, your lender is responsible for closing the loan and disbursing the loan proceeds, and you repay the lender directly, usually on a monthly basis. There are several government small-business loan options available, each with its own terms and conditions.

The best SBA loan for you will depend on what you plan to use the funding for. SBA loans have competitive rates, low fees, longer terms, and offer large loan amounts, but they are hard to qualify for and slow to fund.

SBA microloans Up to $50,000.
Working capital, inventory or supplies, furniture or fixtures, and machinery or equipment.
SBA Disaster loans Up to $2 million.
Provided in response to a declared disaster and used to repair or replace damaged property or assets.
SBA CAPLines Up to $5 million.
Provide working capital to small businesses that have seasonal or cyclical cash flow needs.
SBA Export loans Up to $5 million.
Provides financing to small businesses that export goods or services.

It’s important to note that each SBA loan type has its own eligibility requirements and application process. It’s recommended to carefully review the details of each loan program to determine which one best suits your business needs.

Stakeholders and Financial Statements

The main objective is to provide financial information about the reporting entity to users of the financial statements that is useful in making decisions about providing resources to the entity, as well as other financial decisions. In order to provide useful information to the stakeholders of a business the financial statements must fairly present the position and performance of that business (or show a ‘true and fair view’)

The 4 main users (stakeholders) of financial statements are commonly grouped as follows:

The public may wish to assess the effect of the company on the economy, local environment and local community. Companies may contribute to their local economy and community through providing employment and patronising local suppliers. Some companies also run corporate responsibility programmes through which they support the environment, economy and community by, for example supporting recycling schemes.
Investors and potential investors are interested in their potential profits and the security of their investment. Future profits may be estimated from the target company’s past performance as shown in the income statement. The security of their investment will be revealed by the financial strength and solvency of the company as shown in the statement of financial position. The largest and most sophisticated groups of investors are the institutional investors, such as pension funds and unit trusts.
Lenders need to know if they will be repaid. This will depend on the solvency of the company, which should be revealed by the statement of financial position. Longterm loans may also be backed by ‘security’ given by the business over specific assets. The value of these assets will be indicated in the statement of financial position.
Employees and trade union representatives need to know if an employer can offer secure employment and possible pay rises. They will also have a keen interest in the salaries and benefits enjoyed by senior management. Information about divisional profitability will also be useful if a part of the business is threatened with closure.
Government agencies need to know how the economy is performing in order to plan financial and industrial policies. The tax authorities also use financial statements as a basis for assessing the amount of tax payable by a business.
Suppliers need to know if they will be paid. New suppliers may also require reassurance about the financial health of a business before agreeing to supply goods.
Customers need to know that a company can continue to supply them into the future. This is especially true if the customer is dependent on a company for specialised supplies.

Remember: management and competitors would also use the financial statements of a business to make economic decisions. Management, however, would predominantly use monthly management accounts as their main source of financial information. It is also unlikely that a business would prepare financial statements for the purpose of aiding competitors!

What are the main characteristics of financial information?

One thing stakeholders take a look at is the financial statement you present. You must contain vital information and quality content. Some of what you may need to include are:

Completeness

The information presented to the shareholders should be complete. This means that all relevant transactions and events relating to the accounting period must show in the financial statements in accordance with relevant accounting principles. Roughly put, all transactions included in the statement occurred during the accounting period that the statement covers and that all transactions that occurred during the stated accounting period are included in the statement.

Prudence

The outcome of many events and circumstances presented in the financial statements may be uncertain. For example; a company can only be sure of receiving the cash from a credit sale when the customer physically transfers the cash to the seller. Prudence means exercising a degree of caution when preparing financial statements so that assets/revenues are not overstated and liabilities/expenses are not understated.

Reliability

Leaning more into information and what is considered to be reliable if it is: faithfully represented.

This means that financial information must be similar to economic substance (which is part of the U.S. tax law that is used by the IRS to determine if tax shelters are used to abuse tax liability by reducing it, it is not merely the legal form of a transaction. To quote: “Under the doctrine, for a transaction to be respected, the transaction must change the taxpayer’s economic position in a “meaningful way” apart from the Federal income tax effects, and the taxpayer must have had a “substantial purpose” for entering into the transaction, apart from the Federal income tax effects.”
An example of this would be where a business sells assets at the year end but they agree to buy them back again the day after the year ends by contract. Although, legally, a sale has taken place – the key is that the company has not really sold the goods at all; roughly said, they are window dressing to bump up their year end revenues.

Comparability

Users must be able to compare financial information relating to the entity over time and against other business entities. To this end accounting treatments should be applied consistently from year to year and should be disclosed in the financial statements.

Materiality

Materiality is a vital source of importance to you and others who will be filling out financial statements. Through this information – it can potentially influence the economic decisions of the users when taken on the basis of the financial statements as a whole. This also provides relevance.

Relevance: information is looked at to be relevant if it has the ability to impact the economic commitments and decisions of the users and it is provided in time to influence those decisions.

Income Statements

Income statement is a statement which provides the income a company has and its expenditure. This also shows if a company is making profit or having loss for that specific given time. It basically summarizes the transactions that produced revenue for said business as a result of selling services/products.

What does it provide?

This statement presents the company’s assets, owners equity (which is the owners rights and ownership of the assets in the company. It is what is left over after liabilities are deducted from the assets), and liabilities during a particular point in time. Income statement shows the revenues earned and expenses. Basically the income statement summarizes all the transactions that produced revenue for the business.

What are revenues? Revenue is the result after the company’s sales of product/services. The more revenue = the higher the increase in owners equity. This is completed when the selling company has met the requirements under its initial agreement with the buyer and in result, has received a continuously committed payment from the buyer itself. The flow of revenues depends on the seller’s finalization of the sales agreement and is not dependent on the flow of cash.
What are costs and expenses? This is the money a company provides for the production of their goods and services. An example of this would be ordering merchandise (the cost) to sell later (the goods/services). When the merchandise is sold to a customer – it is going to be sold at a sales price.

The difference between the cost of merchandise sold and sales price is matched. This is called the gross margin. The income statement can be prepared in one of two methods: ‘The Single Step‘ where the income statement totals revenues and then subtracts expenses to come to a result, and the ‘The Multi-Step‘ income statement, which takes a few more steps to find the conclusion. It begins with the gross profit, then calculates the operating expenses. Whatever left from the deducted gross profit, provides income from operations.

Owning a franchise is another type of entrepreneurship. A franchise is a license to use the trademark of an existing business. It is run by a franchisee under the brand name of the national or a multinational company (Franchisor). Starting a franchise can be lucrative if the brand already has a loyal customer base.

Practically, franchisees adopt the entire model of the franchisor, ranging from the branding and marketing to pricing. Once approved, the franchisee enjoys all the benefits of franchisor’s brand and the other resources such as logistics, accounting, and professional consultancy.

Make Sure You Check Your Funds

Being a franchisee, you must know about your financial standing. You will waste a lot of time in finding and searching franchise opportunities without knowing your budget limits.

It is best to prepare your net worth statement before deciding to become a part of a franchise business. Prepare a list of your assets and the liabilities. The difference between your assets and liabilities is your total net worth. Your franchisor will require this information from you. Mostly the franchisor set their minimum net worth requirements.

Always consider beyond the minimum buying requirement of the franchise, listed as registration fee and equipment cost. Do not ignore the costs that involve marketing and advertising activities. You need a significant amount of money to survive on break-even point and the initial loss period before your business actually starts hatching the profits.

Funding

Why SBA Loans are Still a Great Source for Funding