Writeup Name and Date
HISTORY (Update only if the business has had significant changes otherwise, history remails the same, no need to cut and paste from previous session):
PREP DESCRIPTION (If time is charged to this category, please provide prep description):
The following was done in preparation for the session:
Reviewed assessment
Searched SOS Direct
Searched availability of URL
Performed USPTO.gov search
Reviewed NEOSERRA
Reviewed website
Reviewed Business Reference Guide
Other
Assessment details:
PROBLEM:
SOLUTIONS OR RECOMMENDATIONS:
The major areas of discussion include:
Types of Entities
Types of entities
Forming a business
Steps to Forming a Business
Selling a Business
Selling a Business
Funding Fundamentals
Funding Fundamentals
Lending Guidelines
Lending Guidelines for a Startup and Screening Criteria
Banker Evaluation Criteria
Evaluation Criteria used by Lenders
Starting a Food Product Business
Starting a Food Product Business
We discussed the following regarding entities:
Described sole proprietors, LLCs, C Corporations
Differences between types of entities
Organizational documents
Cost of formation
Options to form using attorney, legalzoom, rocketlawyer, mail to SOS or SOSDirect
We do not give legal advice and we always recommend to consult with an attorney
Management
Terminology including members, shareholders, units, shares, by laws, operating agreement, certificate of formation, assumed name certificate and other terms relating to entities
Liability
Piercing the corporate veil
Tax treatment, disregarded entities
IRS defaults for LLCs to Sole Proprietor or Partnership
Election of S Corporation for LLC or Corporation
Getting EIN NUmber
Registered agent
Consent of registered agent
Organizer
Other
We discussed the following regarding entities:
We discussed the following regarding selling a business:
What buyers want
Using a broker or FSBO
Valuation Models
Multiple of Seller's Discretionary Earnings
Recasting financials
EBIT
EBITDA
EBITDA and Owner's Compensation
Addbacks (Benefits of Ownership)
Multiples
BIZCOMPS
Pratt's Stats
Fundamentals that influence multiples
Weights for fundamentals
Difference between weights from textbook and Q Score analysis
Value of inventory
Impact of value to assets to value of business
Buyer motivations
The selling process
Buyer and seller meetings
Confidentiality agreements
Sharing information
Getting an offer
Adding contingencies
Noncompetition agreements
Negotiating the ofer
Due diligence
Attorney and accountant support
Getting documents
Bill of sale
Purchase agreement
Abandonment of assumed names
Security agreements
Schedules
Asset sale vs stock sale
Training and transition
Seller's promissory notes
Financing
We discussed the following regarding selling a business:
Steps to Forming a Business
Emphasized that materials, services or products offered by the SBDC clients are available as a resource to assist the client with busoiness concerns. Making these services available does not imply or constitute a recommendation or endorsement by the SBDC, but is only intended to be a convenience. The client must perform their own :due diligence" and it is advised to seek counsel from an attorney, Certified Public Accountant and other professional advisors regarding the formation and operation of any business. The SBDC will not provide legal or tax advice.
There are a variety of ways to form an entity; use a lawyer or CPA, use www.legalzoom.com, www.rocketlawyer.com, www.bizfilings.com, mail in your formation documents to the Secretary of State or setup an account with the Secretary of State at SOSDirect.com. The SBDC always recommends that the client should consult with an attorney prior to forming any type of business entity.
Apply for EIN with the IRS at http://sa1.www4.irs.gov/modiein/individual/index.jsp
Get confirmation letter from IRS
Search, File or Complete Assumed Name Certificate with County
Determine if a Sales Tax certificate is required
Check with State Comptroller. Web address was provided to client
File for Sales Tax & Use Permit with State Comptroller
Open up bank account. Discussed what to look for in a small business account and possible options to avoid fees.
Perform URL search
Register URL, gave client list of 6 websites to register URL
Discussed merchant services and paypal
Provided copy of Forming Business Checklist
Other
We discussed the following funding fundamentals:
The C's of Credit, including:
Credit History, is a prediction of successfully meeting future obligations
Collateral
Capacity and your ability to repay the loan, cash flow for existing businesses and outside income for startups. Different banks have different definitions of startups
Conditions including current conditions of the industry
Character, criminal record, parole, probations, felony charges. Credit is also affiliated with character
Cash and your equity injection, normally 15% to 30%. Cash injection must not ne encumbered.
Credit Reports, how file is established, lender will look at personal credit report. You and your business credit are one and the same in the beginning.
Credit score should be above 700 normally. 700 is considered average.
We also discussed startup costs, working capital, equity injection, industry experience, sources of capital, personal savings, family and friends, personal investors venture capital, angel investors
Discussed personal funds, savings, home equity loan, personal loan and using retirement funds
Crowdfunding, kickstarter, campaigns
Explained that the borrower must find a bank that wants to do the loan, that the SBA and SBDC do not have money to loan. The SBA Guarantee; "Under the guaranty concept, commercial lenders make and administer the loans. The business applies to a lender for their financing. The lender decides if they will make the loan internally o9r if the application has some weaknesses which, in their opinion, will require an SBA guaranty if the loan is to be made."
Grants: "At this time, Congress has not set aside any monies for grants to start and/or expand a small business. The U.S. Government does have grants that meet other purposes not related to business needs.
SBIR and Technology grants
Other
We discussed the following screening criteria for lending guidelines for a startup:
All 20% or greater owners have a credit score of 700 and willing to sign a personal guarantee
Have any owners had a bankruptcy?
Knows amount of startup costs
Has a detailed breakdown of startup costs
Has 20 to 30% of liquid assets to inject into the business, (unencumbered).
Has additional outside income (startups) sufficient enough to cover personal needs and repay the loan
Does the borrower have personal or business collateral exceeding 70% of the anticipated loan amount?
Does at least one of the owners have direct industry experience? (sometimes waived for franchises)
Is the industry attractive to lenders with a positive 5 year growth outlook?
SBA Form 413, Personal Financial Statement for each owner with greater than 20% ownership or other PFS to support assets and collateral
ALL THE SCREENING CRITERIA SHOULD BE POSITIVE BEFORE PROCEEDING TO A BUSINESS PLAN OR BEFORE APPROACHING A LENDER
A copy of the Screening Criteria and Evaluation Criteria Worksheet was provided to client.
Other
We discussed the following evaluation criteria for lendors:
Strength of credit history, strength of owner's injection, validity of startup costs and needs, strength and stability of outside income, strength of industry, validity of business concept, validit of business plan, validity of business financials, strength of owner's industry experience, strength of owner's business acumen, review of Personal tax returns
Strength of franchsie and review of the FDD and franchise agreement
Has been in business for 2 or more years or is a franchise or has additional outside income if a startup
Other
We discussed the steps to starting a food product business:
Option 2
Other
ACTION AGREEMENT:
ACTION AGREEMENT: BUSINESS ADVISOR
Assist as requested
Request research from SBDCNET
Conduct additional research
Other
ACTION AGREEMENT: CLIENT
Review information provided
Continue investigation
Form entity
Get EIN
Open bank account
Apply for sales tax permit
Register URL
Work on business plan
Develop/improve website
Investigate funding options
Select All
Other
ECONOMIC IMPACT (Jobs Created or retained, any Capital infusion to include equity, loans and business starts):
OPPORTUNITY
Business Start Potential
Long-term Client Potential
Capital potential
Other
Business Start Potential
Existing
Yes
No
Maybe
Probably Not
Uncertain
Other
Long-term Client
Existing
Yes
No
Maybe
Probably Not
Uncertain
Other
Capital Infusion
Yes
No
Maybe
Probably Not
Uncertain
Bank loan
Owner's Injection
Other
Submit
Should be Empty: