How to Fund Your Small Business

Image: woman learning about mistakes in borrowing - Coast Women in Business

by Heather Gurewitz

December 2019 Presentation at Coast Women in Business

Watch our recording (excerpt) of this event and don’t forget to subscribe to our YouTube channel:

Sources of Business Financing

  • Personal savings
  • Friends and family
  • Crowd funding
  • Investment capital
  • Credit cards
  • Bank loans
  • Community (nonbank) lenders

Uses of a Business Loan

  • Equipment
  • Inventory
  • Supplies
  • Materials
  • Working capital
  • Start-up expenses

Establishing the Cost of Capital

  • What’s the term of the loan – how many years?
  • What’s the interest rate?
    • Is it fixed or variable?
    • Is it simple or compound?
    • Is it APR or other price?
  • What additional fees are charged?
    • Closing?
    • Application?
    • Insurance?

Why Get a Term Loan?

Amount Borrowed$10,000$10,000$10,000
Interest Rate10% simple APR15.49-21.49% variable compound (calc @ 19%)1.5-10% monthly fee
(calc @ 6.%)
Closing Costs$250-$650$0
Monthly Payment$323/month~$300 (3% of balance)/month$1,433 then $958/month
Total Interest Paid$1,616$10,035$4,350
Time Frame to Pay Off3 years14.5 years1 year
Total Cost$1,866$9,385$4,350

It saves you money!

The Five Cs of Credit

The 5 Cs of credit are the basis many banks and lenders use to determine whether they can make a loan.

  • Character – Does the applicant have a history of repayment? Does their past history show they can be trusted to repay?
  • Capital – What are the owners investing into the business to show that they are committed to the project?
  • Collateral – Does the borrower have something they can use to secure the loan in the event that the business fails?
  • Capacity – Will the business be able to replay the debt based on the business’s cash flow and other outstanding debt?
  • Conditions – Are there outside influencers or economic conditions that will impact whether the business can succeed?

For more information about financing in Mendocino and Lake Counties, contact EDFC at 707/237-5705 or

Capacity: Can You Pay It Back?

  • For every $1 you owe, you need at least $1.25 of net income
  • For $10,000 @ 10% APR for 3 years:

(Monthly PMT = $323 / Monthly income = X) = $1.00 / $1.25

Business NET income must be $404/month or more

Getting Ready to Apply

Start-up checklist:

  • Business plan
  • Financial projections
  • Equity/Owner investment
  • Collateral
  • Tax Returns
  • Bank statements
  • List of purchases/uses
  • Cost estimates
  • Licenses/planning/zoning info.

Existing business checklist:

  • 3 years of financial statements
  • Financial projections
  • Equity/Owner investment
  • Collateral
  • Tax returns
  • Bank statements
  • List of purchases/uses
  • Cost estimates
  • Licenses/planning/zoning info.

Developing a Relationship

  • Contact the lending institution BEFORE you fill out the loan application
  • Be 100% honest with your lender
  • Ask questions and make sure you understand the answers
  • Be prepared to do the work

Help Getting Started

About the Presenter

Image: Heather Gurewitz - member, Coast Women in Business

Heather Gurewitz is Executive Director of the Economic Development and Financing Corporation (EDFC), a nonprofit business lender serving Mendocino and Lake Counties.

About Coast Women in Business

Coast Women in Business supports the business community on the Mendocino coast. We meet monthly to foster entrepreneurship and professional development on the Mendocino Coast and beyond. Membership fees are $50 annually or $10 per drop-in meeting.

Note: We welcome all – all races, all genders, all countries of origin, all sexual orientations.

Your first meeting is always free, and we offer a limited number of need-based memberships—please inquire. We’re sponsored by the Women’s Business Center at the West Business Development Center. We look forward to seeing you at our next meeting!

Please contact us with any questions. We look forward to hearing from you!

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