Home Plumbing Contractor Free Plumbing and Heating Contractor Business Strategy Questionnaire 2.5 Source of Funds Analysis Questionnaire
How does the Source of Funds section impact the business plan for a Plumbing and Heating Contractor?
The source of funds section of the business plan is the second part of the section on start up, acquisition and expansion financing that we discussed in an earlier section. Once we have established how much money we need for either starting, purchasing or expanding a Plumbing and Heating Contractor we now have to tell the reader of our business plan just how we intend to go about getting the financing that we are looking for. The source of funds section is a simple listing of where we anticipate all our financing to come from for our Plumbing and Heating Contractor.
How much money should I contribute to my Plumbing and Heating Contractor?
The answer to this question largely depends on your personal and business credit as well as you cash flow situation. Clearly the smaller your contribution to the total amount of funds you need to get the business going, purchase or expand your business, the more you will have to borrow in the form of a small business loan from a bank or non-bank lender or partner. The larger the loan amount, the higher will be the cost of servicing the debt and thus the more significant the impact on your cash flow as in the case of Central Plumbing & Heating Inc. located in Charlotte, North Carolina. In the end each small business owner has to evaluate this balance between how much they contribute and how much they borrow in the context of their own financial and cash flow situation.
What contributions levels do banks like to see?
Most small business advisors agree that even in good times a small business owner should come up with at least 10% of the total funds needed to get the business going. In the case of Central Plumbing & Heating Inc. we recommend that our client Felix Gonzalez do the same. When banks are lending freely and money is loose, they may even come up with the entire amount you need without any contribution from you, but just having your money in the game tends to bring in a fiscal discipline that we think is very important.
Can I get funds for starting a Plumbing and Heating Contractor?
The short answer is you should be able. If you have a sound business plan for your Plumbing and Heating Contractor, a good personal financial statement and you are able to meet the five C's of lending - Credit, Collateral, Capacity, Cash Flow and Character - you stand a good chance that your application will be perceived in a positive light.
What kind of facility can a small business owner like Felix Gonzalez of Central Plumbing & Heating Inc. expect to get from banks?
There are two kinds of loans in the small business world that a Plumbing and Heating Contractor has access to - a traditional term loan where you are given a check at the closing for the entire amount approved and have to pay a set payment consisting of interest and principal. There may or may not be a prepayment penalty and these loans may or may not re-amortize. Typically these term loans for a Plumbing and Heating Contractor last between 3 and 4 years and their interest rates are based on the prime rate plus a margin which is arrived at depending on the credit and other aspects of the loan application that small business owners like Felix Gonzalez fill out and submit.
Yet another option for small business owners like Felix Gonzalez of Central Plumbing & Heating Inc. is a line of credit - this is typically a line that one can draw into as needed and also pay down when it is convenient to do. Many lines of credit can have interest only payments but may require that a small business owner like Felix Gonzalez clean up or pay down the line for a period of 30 days every year. Sometimes you can also get a combination line and business loan, where you can use the line for the first year and after that the balance is termed out and converts into a term loan.
The Foundation Grant Directory is a free listing of sources for grants by state. Why not look if there is some free money out there for your business. Hey - you never know!
The Business Loan Application covers every item you will need in your loan package and tells you how to get approved for business loans.
Fire your loan broker and use our Free Business Loans Bank / Lender Directory to find every bank in the country lending to small businesses.