TOMI Magazine November 2012

FORECAST IN MORE WAYS THAN ONE J OE SHURE

Designed to increase entrepreneurship, micro- loans are portrayed as an easy to obtain, sim- ple solution, for startup funding. Microloans aren’t new. But, for some small business owners, it is hard to get their application approved. “We look at a number of factors when we are reviewing a microloan application” - says Joe Shure, co-founder of The Intersect Fund. An organization that helps small businesses grow through various train- ing programs. “First, we want to ensure the applicant has enough income to afford month- ly loan payments. It would be irresponsible of us to lend to someone who lacks the cash flow to make his payments, no matter how intri- guing his business or idea is. To enforce this policy, we verify an applicant’s income by looking at his tax returns and bank state- ments. We also ask him to complete a form on which he estimates his monthly income and expenses.” Before the application process, entre- preneurs need to check their credit history. Obtain a credit report from each of the three major credit reporting agencies: Experian, TransUnion, and Equifax. These reports are a record of your individual or company’s finan- cial behavior. Financial institutions don’t al- ways report to all three agencies alike. By getting a report from each credit bureau, this will allow for an accurate, up-to-date view of all your financial history. “Applicants’ credit histories also come in to play” - says Joe. “We are more forgiving on this front than the big banks, but if an applicant’s credit history shows a pattern of irresponsibility, or if it shows they are behind on mortgage or child support, we will deny the loan. I should note that in addition to offering business loans, we offer a special “credit-builder” loan designed to help borrowers build credit.” Burning bridges isn’t something you want to do… ever. You never know when you are going to need a reference. References are just as, if not, more important to getting fi- nancing for your startup. It tells what kind of person you are. “Once we determine an appli- cant’s income is sufficient to make his or her payments and that his or her credit is halfway decent, we seek references. These usually in-

Joe Shure Co-founder, Intersectfund.org

- clude the applicant’s landlord, someone with whom he has done business, someone he knows from the community, and one other person. We ask these people what they think the applicant would do if he were unable to make a payment, and whether they would lend to the applicant.” “ Our underwriting process might seem pretty similar to those of most banks. While the concepts are the same, the numbers and tolerance levels are different” - says Joe. “ Banks, for instance, are generally unwilling to disburse a commercial loan of less than $25,000—doing so would be unprofitable for them. We will disburse loans of as little as $500. Also, we have a higher tolerance for applicants who have bad credit or lack it en- tirely. Last time we checked, the median cred- it score among our borrowers who have one was 599. Approximately 40 percent of borrow- ers had no score.” When applying for a loan, be sure to thoroughly read the entire application. Make sure that what you are entering is true infor- mation because a lie can cost you. “We re- ceive hundreds of applications per year, and we see some common—avoidable—mistakes

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