While owning a business offers rewards, the job is not easy. Entrepreneurship has its problems, and a critical—and sometimes fatal—one for small businesses can be the lack of access to the financial resources to keep the dream going.

USExpress serves business owners or entrepreneurs who are seeking outside financing to use for working capital, machinery and equipment, acquisition of real estate and expansion.

USExpress also brings potential borrowers into a common trading area where lenders—banks, local development corporations, business investment groups and other financing sources compete on the loan applications.

The first and most common reason why businesses borrow is to purchase assets. A loan to acquire assets could be for buying short-term, or current, assets—such as inventory—and would be repaid once the new inventory is converted into cash as it is sold to customers. Or the funds could be for the addition of long-term, or fixed, assets, such as equipment.

The second reason is to replace other types of credit. For example, if your business is already up and running, it may be time to take out a bank loan to repay any borrowed money. Or you may wish to use the funds to pay suppliers more promptly to get a discount on the price of the merchandise.

The third reason is to replace equity. If you wish to buy a partner's share in your business but you don't have the cash to do it, you may consider borrowing.

Common Loan Features

• Loans are long term or short term.
• Interest rates vary depending on the term, type, size and risk of the loan.
• Repayment may be a lump sum or on a monthly or quarterly schedule.
• Payments may be delayed until the funds help your business generate cash flow.
• The loan may be committed, meaning the bank agrees to lend to you under certain terms as you need funds without requiring you to re-apply each time.
• Some loans require that you maintain compensating balance levels in a deposit account.

Loan Agreements/Common Loan Restrictions

Be aware that a lender will expect you to agree to certain performance standards and restrictions in order to ensure that your business can repay the loan. These restrictions, known as covenants, representations and warranties, commonly include the following.

• Maintenance of accurate records and financial statements.
• Limits on total debt.
• Restrictions on dividends or other payments to owners and/or investors.
• Restrictions on additional capital expenditures.
• Restrictions on sale of fixed assets.
• Performance standards on financial ratios.
• Current tax and insurance payments.

To new or expanding companies and the lenders who want their financing business, USExpress provides the means to get together.

GLOSSARY

Accounts payable

Amount owing to creditors for goods and services on an open account.

Accounts receivable

Amount due from customers for merchandise or services purchased on an open account.

Asset

Anything owned by a business or individual that has commercial or exchange value.

Balance Sheet

Financial statement that presents a "snapshot" of what the business owns, what it owes, and what equity it has on a given date.

Capital

See Equity.

Cash flow

Incoming cash to the business less the outgoing cash during a given period. Also used to refer to the figure derived from net income plus noncash items charged off in the accrual accounting process.

Collateral

Assets pledged to secure a loan.

Collection period ratio

Indicates how quickly your customers pay you. Average accounts receivable divided by net sales, multiplied by 365.

Community Reinvestment Act (CRA)

Under provisions of the Community Reinvestment Act of 1977, banks and thrift institutions seek opportunities to help meet the credit needs of their local communities, including low -- and moderate -- income neighborhoods, consistent with safe and sound operation of the institutions.

Compensating balance

Money a bank requires a company to leave in a deposit account as part of a loan agreement.

Corporate Visa Expense Cards

Corporate Visa Expense cards are held under the name of the business for use by employees. A company should ensure that all authorized cardholders have a clean credit history. Typically, established companies have unsecured Visa cards where the assets of the company and personal net worth of the owners are pledged as security. Start up companies and companies with minimal assets should expect to secure the Visa cards through hard security such as cash.

Corporation

Form of business ownership that is a legal entity on its own and puts stockholders and the board of directors in control. Owners have limited liability for the corporation's actions. A corporation has unlimited life and in most cases is taxed as an entity on its own.

Cost of goods sold

Figure representing the cost of buying raw materials and producing finished goods.

Current assets

Cash or other assets you expect to use in the operation of the firm within one year.

Current liabilities

Debts you expect to pay within one year.

Current ratio

Shows the firm's ability to pay its current obligations from current assets. Current assets divided by current liabilities.

Days purchases in accounts payable ratio

Indicates how quickly you pay your suppliers for inventory purchases. Average accounts payable divided by the cost of goods sold plus change in inventory, multiplied by 365.

Days to sell inventory ratio

Indicates the firm's efficiency at matching purchases to expected sales. Average inventory divided by the cost of goods sold, multiplied by 365.

Debt ratio

Indicates the firm's debt level, or leverage. Total liabilities divided by total liabilities plus capital.

Depreciation

Amortization of the cost of a fixed asset, such as plant and equipment, over several years, or the "depreciable life."

Dividend

Distribution of earnings to shareholders.

Equal Credit Opportunity Act (Federal Reserve Regulation B)

Prohibits lenders from denying your application on the basis of race, color, religion, national origin, sex, marital status, or age, or from discouraging you from applying, or giving you less favorable terms than any other applicant, on such a basis. Regulation B also contains specific rules governing credit transactions.

Equity

The ownership interest in a business remaining after its liabilities are deducted. Also known as common stock plus retained earnings, or capital.

Extraordinary items

Unusual or nonrecurring event that must be explained to shareholders or investors, such as a manufacturer's sale of a building.

Finance company

Competitors of commercial banks in providing credit to households and firms. Unlike banks, they do not accept deposits.

Financial projections

Estimates of the future financial performance of a firm.

Financial statements

Written record of the financial status of an individual or organization. Commonly include profit and loss, or income, statement; the balance sheet, which includes a statement of the company's retained earnings; and the cash flow statement.

Fixed assets

Long-term assets such as buildings, equipment, or property that are not expected to be converted to cash in the near term.

Gross profit

Indicates the revenues of the firm before consideration of its operating expenses. Net sales less cost of goods sold.

Gross profit margin

Measures a firm's profitability. Gross profits divided by net sales.

Gross income

Net sales less cost of goods sold. Installment loan: Loan type that is paid in periodic payments, such as an automobile loan.

Inventory

Value of a firm's raw materials, work in process, supplies used in operations, and finished goods.

Investor

An individual who takes an ownership position in a company, thus assuming risk of loss in exchange for anticipated returns.

Lease

The requirements for a lease are similar to a term loan as the risks to a financial institution as identical. There can be tax benefits applied to leasing. Leased goods are generally owned by the financial institution or a 3rd party. The amortization period should closely match the useful life of the asset purchased (a lease for computers should have an amortization period of not more than 3 years). The value placed on an asset varies depending on resale value and the type of asset leased.

Leverage

Measures the firm's use of borrowed funds versus those funds provided by the shareholders or owners (equity).

Line of Credit

Although not a contract, a bank's promise to lend to a specific borrower up to a pre-agreed amount during a specific time frame. Usually reviewed annually and subject to cancellation without notice.

Liquid assets

Those assets that can be readily turned into cash.

Liquidity

Gauges firm's ability to quickly turn assets into cash.

Marketable securities

Securities that are easily sold.

Merchant Account

Merchant Visa risk applies to unsigned Visa drafts such as taking orders through the Internet or telephone. Risks occur to financial institutions due to fraud. Shop around, many Banks do not require security for Merchant Visa and many E-Commerce Internet sites have online applications for an account.

Mortgage

This is a term loan secured by a building on a piece of land. The maximum amortization period varies greatly between Banks - from 10 to 30 years. Your business must still meet standard lending criteria such as debt serviceability. In general, a business mortgage is more complicated and more expensive than your personal mortgage; many Banks will require you to pay for a full property appraisal, environmental audit, and legal fees in additional to regular Bank fees.

Net income

The sum remaining after all expenses have been met or deducted. Also called profit.

Net sales

Gross sales minus returns and allowances.

Net worth

Excess of assets over debt.

Niche

Particular specialty in which a firm has gained a large market share.

Operating expenses

Those costs associated with the day-to-day activities of the business.

Operating Line

Operating loans are also called working capital loans, Line of Cedit over or overdraft protection. They are loans that fluctuates with the day-to-day cash flow needs of a business. The maximum amount you may borrow for an operating line is primarily based on accounts receivable. Cash businesses such as restaurants and retail stores generally do not qualify for an operating line. Inventory is not generally financed (but exceptions are made frequently).

Operating profit (loss)

Income or loss before taxes and extraordinary items resulting from transactions other than those in the normal course of business.

Operating profit margin

Measures a firm's profitability by examining the pre-tax profit generated from primary operations (versus extraordinary items) in relation to net sales. Operating profit divided by net sales.

Partnership

Can be general or limited, but in either case the general partners are in control. The tax burden is shared by all the partners at their personal rate, and the general partners have unlimited liability. Limited partners have limited liability.

Principal

The currently unpaid balance of a loan, not including interest owed. Also can refer to a primary owner or investor.

Profit

Compensation an entrepreneur receives for the assumption of risk in a business venture. Also called net income.

Profit and loss statement

Summary of the revenues, costs, and expenses for a business over a period of time. Also called the income statement.

Pro forma financial statements

Financial statements for a business where certain amounts shown are hypothetical, or estimated, for the period depicted.

Quick ratio

Liquidity ratio that focuses on the firm's most liquid assets by excluding inventory. Also known as the acid test ratio. Cash, marketable securities, and accounts receivable divided by current liabilities.

Retained earnings

Net profits kept to accumulate in a business after dividends are paid.

Seasonal loan

A loan made for the purpose of meeting predictable and periodic funding needs, such as funding of camping gear inventory before summer purchases.

Small Business Administration (SBA)

Federal agency created in 1953 to provide management and financial assistance to small businesses. Mainly, the SBA guarantees loans through financial institutions. The loans may be used for working capital, machinery and equipment acquisition of real estate, and expansion.

SBA Loan (USA)

This is a loan where the Government partially guarantees repayment to the Bank. SBA loans are used when the business is slightly outside a Bank's standard lending criteria. A business must qualify for financing through a bank (using regular banking guidelines) and gain further approval from the SBA prior receiving any money.

SBA's 7(a): Used to assist most types of small business loans up to $1 million including: equipment, real estate, working capital or purchasing existing businesses. In most cases the SBA will guarantee no greater than 75% of loan value and a maximum amortization of 6 years. SBA loans are targeted at existing and growing businesses; it is difficult to finance a start up business through this product.

SBA's MicroLoan: Targeted at very small and start up companies to purchase computers, equipment and materials required to launch a business. You may borrow up to $25,000 for up to 6 years. Interest rates do not exceed prime plus 4%.

SBA's 504: Used to purchase real estate for businesses that are likely to increase the level of employment at the company. The guarantee value may be as high as 90% of the appraised value of the property.

SBA's Fastrak Loan: Some large, national Banks are able to approve loans up to $100,000 without consulting the SBA. The SBA may guarantee up to 50% of the loan value.

SBL Loans (Canada) renamed CSBFL

These loans are similar to SBA loans in the United States where the Government provides a guarantee. Maximum loan value is $250,000 where the chartered Bank's approve the loan without consulting a Government agency. These loans are targeted to both existing and start up businesses.

While the program is more flexible on paper we notice the following guidelines.

Uses of funds: To purchase computers, equipment or renovations (cannot finance working capital)

Repayment: Maximum 5 years (3 years for computers)

Personal guarantee signed by the owners: 25% of the loan value

Percentage of assets financed: Up to 90% of the asset value depending on the type of asset being purchased and strength of the business. It is rare for a restaurant to receive financing greater than 50% of the asset value.

Costs: 2% upfront fee to the Government, legal fees, and interest rates cannot exceed prime plus 3%.

Sole proprietorship

A type of business where the owner has full control and unlimited liability. A sole proprietorship is taxed at the personal income tax rate.

Term Loan