qprev_HBB Manual 2.qxd - Small Business BC

Feel and Look ConfidentA lender looks for four things in any loan orfinancing application:1. Character – Are you the kind of personwho pays your bills? Are you reliable?Can you run the business?2. Credit – Do you have a good credit rating?3. Capacity – Can the business generateenough to pay the lender back?4. Collateral – Do you have things of valuewhich can be used to secure or guarantee aloan?These things help a lender decide whether or notyou and your business are a good riskfor a loan. The business plan is your key toconvincing a lender that you are a good risk.Consider revising your financial and businessplan if the feedback you get suggests you needto. Keeping your goals in mind will keep youfrom getting discouraged.Failure to get a loan will not prevent your startup.You may need to change your time frame, butif you’re determined to reach your goals througha home-based business, you’ll find ways toobtain money. If you can’t get credit, then maybeyou’ll have to earn the money some other way –such as by postponing your business start-upuntil you have enough money, or scaling downthe business, or finding ingenious ways to reducethe amount of start-up capital you need.Compose a Financial PlanThe financial plan is the business person’sanswer to the question, “Will the business makemoney?” If you don’t have a good calculator,now is the time to buy one.Don’t take a flyer!The Online Small Business Workshop (Session 4)offered by the Canada/British Columbia BusinessService Centre gives this warning:An experienced pilot does not fly a risky missionwithout a detailed, well-researched flight plan.Yet people everyday, with minimal businessmanagement experience, try to operatebusinesses without active business plans. “Takinga flyer” on a business venture is no less a lifeand death hazard for you, your family and yourfriends, than flying that dangerous mission in amall plane.Make no mistake, when you start a business, yourhome life, your family life and your marriage areon the line, front and centre.Prepare Financial StatementsFinancial statements is a general name for thedifferent ways businesses present moneyinformation. The information actually presentedin financial statements is quite straightforward,although there is a lot of it, called by variousdifferent names. The approach in this guidebookis to introduce and explain the main statements ina complete financial plan. Few home-basedbusinesses will need them all, at least not in thestart-up stage, but a basic understanding of allkey financial aspects is a definite business assetwhen launching a business that is expected togrow.Financial statements covered in this part of thebusiness plan are:• Estimated market share• Sales forecast• Costs of production or servicessolutions for small business home-based business 75