Money is the lifeline of any business, so whether you’re starting a business or running an existing one, securing financing is a major factor, especially for small businesses.  Many budding entrepreneurs find the task daunting and don’t even know where to begin.

Here’s a simple yet practical guide on how to go about preparing to apply for a small business loan.

1.    What criteria do banks look for in making small business loans?

Different banks or lending institutions may have different standards, but in general, in order to consider your application for a small business loan, banks will require:

• The loan must be for a sound business purpose. For SBA-guaranteed loans, the business must be eligible based on size, use of loan proceeds and the nature of the business (no lending, speculating, passive investment, pyramid sales, gambling, etc.)
• You and your partner(s) are of good character, have experience and good personal and/or business credit history
• Ability to pay back the loan- reasonable to strong collateral (personal and business assets) is very important. SBA expects the loan to be fully secured, but we will not decline a request to guaranty a loan if the only unfavorable factor is insufficient collateral. And of course, owners must have personal equity investment in the business/skin in the game.

2.    What information will you need?

Different lenders may require more or fewer documents, but in general, you will need:

• Personal and business credit history
• Personal and business financial statements for existing and startup businesses and as well as a projected financial statements
• Strong, detailed business plan (including personal information such as bios, education, etc.)
• Cash flow projections for at least a year, and
• Personal guaranties from all principal owners of the business

3.    How can you set yourself up from the beginning to make the process easier? (i.e. accounting systems, etc.)

Be prepared; be thorough; be truthful.

• Choose your lending institution carefully. Larger banks tend to shy away from small loans as they are less profitable and take the same amount of underwriting and servicing. That doesn’t mean large banks do not make small loans; it is just more difficult.
• Approach banks or lending institutions you have worked with or are a customer of
• Explore community banks and Credit Unions
• Talk to a lending officer and find out exactly what documentation they require
• Be thorough, bring everything they ask. Many loan applications are denied or face unnecessary hurdles because of incomplete applications.

Even before you start gathering and organizing the information required by lenders to consider your application, you should educate yourself regarding business loans so you can understand and discuss intelligently with the lending officers when the time comes.

4.    What is the typical size of a small business loan?

Small businesses come in many sizes, from a start-up of a one-person company to hundreds of employees, and their financial needs vary accordingly, so “typical” also varies. That said, in the banking industry the median small business loan is about $130,000 – $140,000 with highest around $250,000. SBA small business loans range from about $5,000 (microloans) to $5 million (largest guaranteed) with the average loan around $371,000.

5.    How can you get financing to start a business since many banks want to fund growth?

Start-ups are probably the most difficult ventures when it comes to securing financing. Many start-up businesses seek financing from family, friends and credit cards.  If the credit is sound, the business plan strong and you have enough personal resources to invest and collateral to guarantee, smaller, community banks and  other community financial institutions and Credit Unions may consider lending you money.

Your best bet by far is SBA assistance. Begin by visiting SBA’s website , where you will find a wealth of information not only on how to secure a small business loan but equally importantly, other services and training opportunities to help you succeed.

6.    Are there associations that can help?

SBA works closely with a large network of partners that leverage SBA resources and are just one phone call away and ready to provide extensive help.

• SBA District/Branch Offices– at least one in every state
• SCORE– (approximately 300 chapters nationwide)
• SBDCs – Small Business Development Centers; (approximately 900 locations nationwide; associated with higher education institutions (colleges and universities)
• WBCs- Women’s Business Centers (approximately 100 educational centers nationwide)

Many times financial tools are overlooked as a way to help increase a company’s bottom line. Financial tools have the ability to transform a company’s operations, improve productivity, reduce costs and increase profit margins. It’s essential for small business owners to take advantage of the right tools and resources to more effectively plan for the future and overall success of the business. Here are the top ten financial tools for small business owners.

1. Accounting Software – Organizing your business expenses in a computerized accounting system rather than paper-based accounting offers numerous benefits. With accounting software such as Intuit QuickBooks™; a business can free up time by simplifying, automating, and tracking its key financial data. This is especially useful when tax season comes around.
2. Business Plan Software – Whether you aim to present a plan to an investor, creating a plan to get your ideas in order, or planning for growth or expansion, the business plan software you select should be simple to use and help you reach your goals. SBA’s Business Plan Tool provides a step-by-step guide to help you get started.
3. Financial Analysis – Knowing your numbers is the key to managing a successful business. By keeping tabs on your profit and loss statement, cash flow statement and balance sheet all in one place, you will be able to see where your business stands – and take steps to stay profitable. Explore Score’s library of financial statement templates to get started.
4. Inventory Management – Every business needs an inventory management system. Whether you’re in wholesale, retail, service or basically any other industry, you have to keep track of your products. You can efficiently track inventory with cloud-based solutions available in the marketplace. Be sure to do your due diligence when choosing the right inventory tracking software for your business.
5. Invoicing Software – Handling all billing by hand takes a great deal of time, and we all know that time is money. Invoicing software leaves little room for human mistakes, which means fewer missed payments or late payments will fall through the cracks. Just about every small business owner can benefit from switching from paper invoicing to dedicated invoicing software.
6. Credit Card Processing – Customers expect to be able to pay for products and services using a credit card. Whether it’s a point-of-sale, mobile credit card reader, credit card terminal or online payments; it’s essential to first decide which methods of accepting credit cards for payment is best for your business.
7. Business Credit Card – “There are plenty of benefits to using a business credit card versus a personal credit card for your small business,” says Alison Cahill-Rouse, a spokeswoman for Capital One. “You’ll also have access to business-specific benefits, such as employee cards and spending controls, and specialty service tailored to meet small businesses’ needs.”
8. Business Debit Card – For quick, convenient access to your business checking account a business debit card is a must have tool for business owners.  Business debit cards offer the power to make purchases at millions of locations worldwide. The funds are debited from your business checking account with transactions clearly outlined on your monthly checking account statement.
9. Business Credit Monitoring – It’s crucial for small business owners to keep a close eye on changes to their reports that could affect their company’s ability to obtain credit. Business credit reports and scores are dynamic. They regularly change based on a variety of criteria. Consider enrolling in an affordable monitoring service so you can review your company’s credit file to ensure it’s accurate and up-to-date.
10. Business Credit Check – Small business owners can protect their company’s cash flow by identifying their most creditworthy customers through business credit checks. Checking a company’s business credit report enables a small business owner to analyze a company’s current credit standing and make well informed credit decisions.

Small business owners are so busy running their companies there’s little time left to keep their financial house in order, too. So, these financial tools are an effective way for small business owners to manage and grow their companies while improving their bottom line.

If you’re applying for an SBA loan program, a P&L statement with forward projections and historical data is a must-have. Small businesses are inherently a high-risk investment for lenders, so the more you can do to prove the integrity of your business and your data, the greater your chances of securing a loan.

In fact, alongside impeccable credit, a solid business plan, a strong personal resume and a strategic marketing plan, a P&L statement (also known as the income statement) is one of the top five small business loan requirements, according to Kabbage.

Here are five things you can do to bulletproof your P&L statement and be on your way to securing the financing you need:

1.  Understand what your P&L statement can do for your business

Your P&L statement is a summary of the profit and losses that your business has incurred during a particular time period. Basically, it’s revenue in, less expenses incurred (cost of goods sold, OPEX, and depreciation).

In addition to showing how profitable your business is, your P&L statement also sheds insight on what money is left in the business to pay your salary, clear debts, fund growth or hire an employee. It won’t, however, show if you have enough cash to pay your bills. (Refer to your cash flow statement for those details.) In a nutshell, it’s your financial health report card.

2.  Take advantage of available tools

Getting started with a P&L statement isn’t the easiest thing in the world. If you need help, download SCORE’s profit and loss statement template (.xls). This includes all the necessary calculations to help you forecast net profit. To streamline the process completely (and ensure reliable data), consider cloud accounting tools. Because they automatically feed in data from other reports, cloud software eliminates the hassle of data entry, synchronization and maintenance.

3.  Set profitability goals

How much profit do you want to realize from one month or quarter to the next? Use your P&L statement to track performance against those goals and use the data to glean insights. For example, if revenues were down one month, is there something you can do from a marketing perspective to generate more sales? If expenses are running high, make sure you understand why and plan accordingly.

4.  Set projections

Your lender (and the SBA) will want to see your projections for future profits and losses, plus a business plan that explains how you intend to make your numbers. Plan on projecting out a minimum of one year into the future. Three years, however, is ideal because it shows the impact that external financing will have on revenues and profits. For year one, have a clear sense of your monthly projections; for the remaining years, it’s usually okay to focus on quarterly targets.

5.  Review it regularly

At a minimum, review your P&L statement on a monthly basis. It is a good idea to get into the habit of checking everything on a weekly basis, so you can stay on track and make necessary adjustments to your business plans. Consider hiring and accountant to keep an eye on your key financial statements; the benefits will almost outweigh any fees. Things to look out for include:

• Increasing sales, but declining profit. This is a sign that something is wrong. Are your costs too high? What about your margins?
• Stationary sales. Look for opportunities for growth in new markets, product lines or lead generation campaigns.
• Increases in overhead (utilities, rent, insurance, etc.). Look for ways to keep costs low by shopping around.
• Increases in the cost of goods sold (COGS). Find out why.

So you’ve got a great idea for a new product or solution and you think it’ll be a sure-fire hit.

Not so fast. To find out if your idea has traction, you need to test it.

It’s an often-overlooked step that can help you refine your offering and ensure a successful go-to-market strategy. So before you put pen to paper and write your business plan, get out there and assess the validity of your product.

Here are six low cost tips on how to best test your business idea.

1. Find your Idea’s Fatal Flaw

SCORE (link is external) offers some great tips on how to validate your idea. In this article, guest contributor, Daniel Kehrer, stresses the importance of banishing the idea that your product or solution is perfect. It isn’t. It may have one, two, or multiple flaws. Ask yourself:

“What am I missing? What possible pitfalls am I not seeing? How might my competitors respond? What…makes me think that my business or product idea will work when…others don’t?” Once its flaws have been identified, find a way to fix them.

2. Test Outside your Network

There’s a lot of advice out there about testing your idea on friends and family. Not always. Also writing for SCORE, Jeanne Rossomme, recommends (link is external) that entrepreneurs refrain from soliciting input from their immediate network, including their team. Instead focus on those whose opinion matters – your target market.

One way to do this is to crowdsource your market research. Form a focus group. This can be done virtually or in-person. Simply advertise for volunteers (Craigslist is a good place to start). Then provide these people with free samples of your product to test. Alternatively, assemble your focus group in one place and have them try out your product, alongside the competition’s, and see what results you get.

If your idea is less tangible or you don’t have a prototype in place, walk the streets and find out what people want. What’s missing in their market? What is the competition not providing? If your solution was available to them, would they take advantage of it?

3. Tweak It, But Not Too Much

As you test your idea you’ll encounter lots of feedback. In many cases, it can be overwhelming. This is especially true if your trying to get investment or are pitching a concept or prototype to a new client (particularly one who promises to buy it in bulk). It can be tempting to edit your idea to the point where it becomes so customized to the needs of a single customer, that you rule yourself out of the rest of the market, or waste precious resources trying to check all boxes.

Instead focus on the must-haves that translate well across several markets or customer profiles. There’s plenty of time for customized flavors of your idea down the line once you make a profit and can start diversifying.

4. Perfect your Elevator Pitch

You see this all the time on TV show’s like Shark Tank. You need to pitch your idea in 30 seconds or less. What challenge does your product address, how? How is it different to the competition (what’s your differentiator?). And what is the outcome for the buying customer. People buy outcomes, not products. Your elevator pitch is something you will take with you for the lifetime of the idea – whether you’re pitching to investors, customers, manning a tradeshow booth, or briefing a marketing agency.

5. Create a Mini Version of your Idea

Creating a full-blown version of your idea can be expensive. Smart Passive Income’s Pat Flynn, has some great ideas for creating a mini-version of your idea to test the market. He uses the example of the food truck industry, which is often used as a platform to test an idea, concept, and menu before the owner commits to building a bricks and mortar restaurant. But the theory can be applied to other industries too. If you run a hair salon and want to start a massage therapy business at a new location, you could test demand by starting small by dedicating a small area of your current location to provide the new service on a part-time basis.

Likewise, if your product can be experienced without launching a full-fledged version, such as a piece of software, music, literature, and so on, test it as such.

6. Run Dummy Marketing Campaigns

This is an increasingly popular and effective way to gauge market demand. Promote your idea for a product or service as if it’s already available on the market.

One way to do this, suggests entrepreneur advisor Evelio Pereira of Epicster.com, is to create a landing page to promote your idea. This could be hosted on your website or on a new domain. Include sales information, product/solution features, etc. Be sure to include a “Buy Now” or “Learn More” button.

Obviously you have nothing to sell yet, so when the site visitor clicks through take them to a page featuring the message that the product isn’t available yet, but if they fill in the form they’ll be notified when it’s launched.

You can use various outlets to promote the page – run an email marketing campaign to your existing customers. Or, if you have the budget, invest in Facebook ads (targeted to your geo-location and demographic) or Google Adwords or Bing Ads.  Your click through data will also provide valuable insight into whether your idea is in demand!

If you operate a “local business” (meaning one that gets most of its customers from your local area), don’t overlook the Internet as an important way to attract new customers and stay top of mind with existing customers or past customers.

According to Google research (link is external), having good online information gets more people to shop in brick-and-mortar stores and businesses.

For local businesses, there are some specific steps to take to make sure that your business can be found by searchers in your geographical area.  Because after all, you want local shoppers.  So being found by local searchers is the name of the game for you — not just Web visibility in general.

Here’s a checklist of important steps to take for local SEO:

1. Address the basics of standard SEO

Every website owner should pay attention to some standard types of search engine optimization  (called SEO).

Think of a well optimized website as the foundation for good local search visibility.

At a minimum, this includes making sure you use relevant keywords (link is external) (i.e., terms that people might search for) in your content.  Your site should have enough relevant content so that you draw in visitors with informational articles, product descriptions and other types of content that prospective customers might be searching for.  Also, you need to keep that content fresh by updating it and adding to it from time to time.  Good content not only helps attract visitors but it helps your site rank higher in search results for related searches.

Also pay attention to the technical fundamentals of your site. Search engine spiders need to be able to find and index all your relevant content. Speed of your site pages is also important to search engines these days.

2. Include information about your business on your website

Check your website.  Is it easy to find your address for each of your locations?  Is all information accurate?  Are there phone numbers and email addresses?

Are your products and services listed? Do you have hours of operation on your site?

Information that is easy to find not only helps website visitors find you, but this information gets picked up by search engines.  Address information in particular helps make sure geographically local searchers can find your business.

3. Make your website mobile friendly

Many local users are looking for places on the go using a smartphone. That’s why it’s important to make your site mobile friendly.

If someone wants to know your address and hours, they should be able to access that information effortlessly.  If your site is not easily readable on a phone, or if the links or buttons are too small to navigate with fingers, you could miss out on a sale.

4.  Claim and complete your Google listing

For local businesses, Google has a powerful free feature called “Google My Business (link is external).”  This is a place where you can list your business.  This listing helps your business show up for geographically relevant Google searches, on Google Maps and in mobile search results.  Claim your listing, or if you already have done so, verify accuracy and complete any additional information.

5. Leverage Facebook’s “local” features

Facebook is a hugely popular site with 1 billion monthly users.  And Facebook has been adding to its features to enable consumers to connect with local businesses.

Make sure to set up a Facebook Page (link is external).  Complete your address information to enable your Page to be found for nearby locations (link is external).

Keep your Page updated from time to time.  Facebook business Pages typically have places for consumers to review a business, so be sure to monitor reviews.

6. Check and claim all online listings

Use the free checker tool at Moz Local (link is external) to see how your business appears in other places online where business listings appear. Claim and update any incomplete or inaccurate listings.  Most

7. Set up profiles on social sites

Social media is the online equivalent to word of mouth in person.  If you set up profiles on social media sites, there’s more likelihood that prospective customers will find your business.  Stay active there, too. Social mentions help you stay on people’s radars and provides great free advertising for your business.

Follow these approaches to make sure your local business gets as much online visibility as possible.

Ignoring your financial statement is like ignoring the health of your business. Startups and new business owners often overlook understanding gross margin. This can have a direct impact on your ability to effectively manage a growing business, price your products, and most importantly, make a profit.

Gross Margin Overview

The gross margin represents the percent of total sales revenue that the company retains after incurring the direct costs associated with producing the goods and services sold. The higher the percentage, the more your business retains on each dollar of sales to service its other costs and obligations.

But gross margin is so much more than that; it is a measure of your production efficiencies and it determines your break-even point. It is a key calculation as you assess your startup business risk and profitability.

The Importance of Knowing Your Gross Margin

Understanding and monitoring gross margins can also help business owners avoid pricing problems, losing money on sales, and ultimately stay in business. If you don’t know what your gross margin is, then making sense of anomalies in your income statements becomes tricky.

Many businesses that appear to be thriving often fail because their prices are too low or their costs are too high and they can’t make a profit.  Establishing a low price strategy is tempting, especially when dealing with cutthroat competition – however, it’s rarely sustainable and it can be tough to increase prices later, even with a loyal customer base. Using gross margin calculations and other factors as you plan your business can help you avoid pricing mistakes before it’s too late.

Cost control is another area that can trip up small business owners. It’s surprisingly easy for staff to ignore cost control procedures, which can quickly erode your margins. For example, if higher cost materials have made their way into your production process (and this could be something as simple as a chef using a higher quality food product or making bigger sandwiches in the kitchen than had been budgeted for) – then you have a problem.

Knowing what your gross margin is on every product throughout the life cycle of your business and acting on any variations you detect can help you identify these problems before it’s too late.

How to Calculate Your Gross Margin

Calculating gross margin is easy if you’ve been in business long enough to get some record keeping under your belt, but for startups the process is a little more complex.

Calculating gross margin for an existing business – Start by looking at historical data over a business quarter or year and identifying your company’s total revenue for this period and the costs of goods sold (raw materials and labor).

Gross Margin (%) = Revenue – Cost of Goods Sold/Revenue

Calculating gross margin for a startup – If you don’t have any income reports to go by, calculating your potential gross margins involves some research. Consider the following:

• What is the competition doing? If you can, try to find out the gross margins of your competitors or industry averages to benchmark where yours should be. Even if their financial data is not in the public domain, their pricing and your understanding of costs will give you a rough estimate as to where your margins should be.
• Assess your costs and explore ways you can decrease these over time. This should give you an early indication of the profitability of your business. Remember that gross margins change over time through reduced costs and increased efficiencies.

Using Gross Margin to Calculate Product Pricing

While understanding gross margin can help you avoid pricing and cost control nightmares, should you be using it to calculate pricing? Many businesses go this route because it clearly expresses how many of your sales dollars are profit. However, many other factors help determine your pricing strategy, including potential market share, distribution costs, seasonal considerations, perceived value, and more.