By Howard White - SCORE

This is article No. 8 of a monthly series published by SCORE.

In December, we learned the absolute criticality of having a business vision and strategy and knowing the steps needed to launch a business before investing anything into your venture. Today, we’ll talk about everyone’s favorite (or least favorite) subject: money.

If you’re fortunate, you’ll have ample cash saved up to launch and run your business without obtaining outside financing. For startups, 25 percent required no funding in 2016 (such as home-based service businesses), and 57 percent were able to launch their business by just using their personal savings, according to the Small Business Administration.

Starting with your own money is a little easier to do if, like most startups, you launch on a shoestring. More than half the start-up businesses in 2016 launched with less than $5,000.

But if you need to hire employees, open a storefront or warehouse, or purchase inventory or equipment, you will likely need to find institutions or individuals that will invest in your amazing business concept.

How do you find people who will work with you, what will they need from you, and how do you even start that conversation? This is where SCORE can help.

There are many sources of money available, but successfully obtaining financing requires planning and some hard work. Many prospective business owners ask me about grants — where people can apply for free money that doesn’t have to be paid back.

These are extremely difficult to find, especially for for-profit business (most grants are intended for non-profit organizations). Other sources of funds come from traditional banks, SBA-guaranteed lenders, community funding institutions, crowd-funding, home-equity loans, credit cards, and family and friends. A SCORE counselor can help you understand the pros and cons for each funding source.

So, let’s get started. Lenders are going to ask key questions such as: How much do you need to borrow? What are you going to use it for? How long do you need it? How have you handled credit in the past? Can you prove through financial statements and profit projections, that you’ll be able to pay the principal and interest back?

The first three questions are typically answered in a business plan that identifies your company, your objectives, mission, and strategy for success. Your FICO score details your credit history (the good, the bad, and the ugly), and 2-plus years of statements from your banks
and tax filings, tell your financial story.

You will likely need to write a financial projection showing reasonable estimates for income and expenses for the duration of the loan, including the estimated loan payments back to the lender.

I strongly recommend doing a self-assessment before talking with a lender. Read up on the “Five C’s of Credit” which are: character (reputation through the FICO credit report), capacity (ability to repay — especially evaluating your debt-to-income ratio), capital (what you already own, and are investing in your company), collateral (the amount of your money you are committing to the business — the bank wants to see your skin in the game too), and conditions (is there a good economic environment for growth, and whether you are positioned for success in the future). If you see problems, you can bet the lender will see them, too. It is far better to resolve these before you ask the bank to do their analysis.

Does this sound overwhelming? It would be if you did this all by yourself! Talk to a SCORE counselor — we’ve helped dozens of companies locally, and tens of thousands of companies in the United States, and we’re pretty good at this.

We will help you prepare your business plan, financial projections, and other documents as needed; we will introduce you to lenders who would love to work with you; and we will help you throughout the entire process. Oh, and our help is 100 percent confidential and 100 percent free.

Nationwide, nearly three-fourths (73 percent) of all existing small businesses use some type of financing each year. Don’t be afraid to start your business, or grow your business, just because financial work intimidates you. Let us help you — that’s what we do.

If you’re ready to take the next step, go to and click on the blue rectangle “Get Started, Request a Meeting” - fill out your contact information, and a local SCORE counselor will contact you. We look forward to working with you!

For more information, please contact Howard at:

SCORE is a national organization and resource partner of the U.S. Small Business Administration (SBA). The Tuolumne County SCORE chapter covers Tuolumne and Calaveras counties.