CEO To Rainmaker
CEO To Rainmaker
"The Christmas Business Check List -7 Simple Steps to Obtain Expansion Loans
Welcome folks to show 94 of CDO to Raymaker. Happy holidays. Ho ho. Uh, maybe you can't see, but I have my Christmas sweater on, which has won several contests as the ugliest sweater of the evening. And I only wear it once, so you should feel honored. Anyway, you know, one of the critical factors in business is to engage in planning both short and long term. If you do anything on the fly, I'll probably see your business tombstone in the cemetery. Don't let your business die. Make it live. Plan. The mission today, the mission of today's podcast is to offer advice that December is the perfect month for a small business owner to set goals, plans, and budgets for the 2026 fiscal year. While there are many departments of your business that require planning, the most important is finance, bar none. You need money to buy all the things you need to scale your business, whether it's staff, inventory, equipment, accounts receivables, space, etc. So ask yourself, how much money will I need to make 2000, my make my 2026 expansion goals, both business and personal, come true. Most owners, after they've determined that number, will then look to borrowing the money from commercial banks or similar institutions. As and the reason for that is that they offer the lowest interest rates. Usually, right now, in today's cost of funds, it's probably in the 7 to 11% range. So as an aside, anybody can borrow money from online lenders that guarantee 48-hour turnaround time. But if you read the fine print, you're paying somewhere between 30 to 65 percent. You don't want to be part of that crowd. How can you make money at that number? So you may do all the proper research and planning and present your commercial lending and opportunity and get unceremoniously turned down. That's not a good feeling. Not to mention, it won't be able, you won't be able to scale your business. So today's podcast addresses the ABCs of getting loans approved rather than getting loans declined. The title of today's show is The Christmas Business Checklist: Seven Steps to Make Your Business Lender Ready. The list was compiled by Ampac Business Capital, one of the leading SBA institutions in Southern California, as a service to its loan applicants. Ampac has affordable money, they have their own loan committee, they have the ability to make their own decisions, but they also have a vast network of commercial banking partners in Southern California. They are intimately aware of the commercial banking partners' underwriting criteria. Um, having known both camps, um, I would say AMPAC and banks and the banks criteria are similar, but AMPAC is more lenient and more forgiving. And in today's world, we need a lot of that. We need love, right? That's right. My special guests and I will educate you today on these seven steps and much more, so that you can significantly increase the odds that your 2,000 loan requests will be approved. My guest, Brian Kennedy, is the ecosystem director of Ampac Business Capital. Brian has a master's from Providence. Um that's a East Coast college, and I'm a West Coast college guy, so I'll I'll give that to him. All right, I appreciate you too. Brian is a key executive of the company. So let's get started, ladies and gentlemen. Please welcome Brian Kennedy.
SPEAKER_01:Oh, thank you so much, Gene. Always a joy to come on and collaborate with the CEO Terrainmaker. Right. And don't forget, I'm also the loan doctor, too. Come on, loan doctor. That's right, baby. That's right. And this is one of the best platforms to really be honest about how business owners can be effective. Um, obviously, your background speaks volumes to this topic of finance. So I'm grateful to be able to be partnering with you today.
SPEAKER_00:All right, so so what I'd like to do, Brian, is to have you identify the seven steps quickly, and then you and I can discuss each step in greater detail with some comments and some opinions and additional input from you. So fire away, young man. What are the seven steps?
SPEAKER_01:Absolutely, Gene. So we try to keep it as the simple seven. What are seven simple things that you need to be effective in planning to get your business loan approved? Well, the first piece is a simple application. You have to be able to submit an application that is legible, that is eligible, and that is clear. A part of that application is what's called the use of fund sheet. How do you plan to use the funds? So you need to have that mapped out. That's a big piece for step. Okay. Okay. Step two is step two is personal financial documentation. Okay. Which for us looks like tax returns. So we're going to look at the last three years of your personal tax returns for all owners of the entity with 20% or more ownership.
SPEAKER_00:Okay, so if they're a 10% owner or less, they don't have the submitted personal tax return. Correct. Correct.
SPEAKER_01:Okay. They're only looking for personal financial information from those that would be personally guaranteed loan. Okay. Step three. Yes, sir. So step three is the business financial information, historical financial information, which is the business tax return. So we asked for three years of business tax returns. Now, if you don't have three years, that's okay. If you only have two years, we'll take that. If you only have one year, we'll take that as well. But step three is making sure that your business is compliant with the IRS because we work for the SBA.
SPEAKER_00:So I I got it. I got it. So what if you have a deadbeat CPA that's working on an extension for two years ago?
SPEAKER_01:Yeah. So we would we would need you to backfile those last two years. You might want to look at getting it.
SPEAKER_00:My apologies to all those CPAs out there. None of them are deadbeats. They do everything on time.
SPEAKER_01:Okay, what's what's step four, Brian? Yep. So knowing that we asked for personal tax returns, business tax returns, step four, we have to collect a form what's called the SBA personal financial statement or SBA Form 413. This is where we look at personal assets versus personal liabilities. So we can understand global cash flow. There's business cash flow. How does the business interact with how much capital needs directly? But then we have to look at global cash flow. How will the personal financial reality of the owner affect the business? So that's the personal financial statement. Okay. And step five? Step five are the bank statements. So we look at the last three months of personal and business bank statements. This is to confirm everything that we're seeing around tax returns and everything leading into step six that we see on the financial statements of the business for year-to-date information. And that leads us into step six, Gene, which is the business balance sheet and the year-to-date per profit and loss statement. We need both of those year-to-date, which basically means the end of the last calendar month. So as we're in December, it would be the end of the calendar month of November. So we would want a balance sheet and a per and a profit and loss statement for the year through November 30th. Oh we're we care about your health. That's the biggest thing. We care about the health of your business or personal health. Well, as you can see, we're really checking on both. Okay. Because we want to make sure that your business is healthy and that you as an operator or the owner of the business are financially healthy too. And so we're responsible for both. And the the last step, Gene, number seven, is what we call the business debt schedule. Okay. This is to help us see any debt that the business has tied to it, whether it be business credit cards, whether it be business lines of credit, whether it be other term loans. These are all pieces that we need to see clearly for us to be able to proceed.
SPEAKER_00:Oh, that certainly makes sense. So, Brian, if you don't mind, I'd like to add uh an eighth step. Um, and one, this is just for me and my walk. Uh, I I would really like to see, oh, I tell my clients it's in their best interest to do a monthly projection of the next fiscal year, full sales, full expenses, full profits. Uh and those numbers should assume that you're being granted the loan in question. Um, and the key is to make sure that your incremental sales, but primarily your incremental income, is sufficient to make the monthly payment on the new loan. And with the proviso that the sales forecasts and the income forecast is defensible, it's believable, it makes sense, it's just not blue sky or stuff you threw against the wall.
SPEAKER_01:Right.
SPEAKER_00:Am I okay on that?
SPEAKER_01:Absolutely. Has to be realistic. Okay.
SPEAKER_00:Okay. So let's go back to the steps then and just a little bit more detail. And maybe I should ask the questions, or maybe if you want to add more comments. So, step number one, it seemed like a very simple loan application. Does that trip up a lot of people and what trips them up?
SPEAKER_01:Yeah, so the loan application itself normally is pretty straightforward. Um, the piece that we have to help people refine is their use of funds. Okay. How intentionally are they using the funds? That's normally what gets people tripped up.
SPEAKER_00:Okay. So you just can't say, I'm looking for 400 grand. And you're gonna say, for what? Inventory, equipment, and your computer system? I get it. Okay. Step two, uh, provide the last three years personal tax returns. I think that is just obvious uh that you'd want to do that. Step three, provide the last three years business tax returns. Now, you and I both know that in many cases the business tax returns can either be done on a cash basis or accrual basis. Right. Uh, which one do you prefer? And does it make a difference? And what's your process of looking at accrual business tax returns versus cash? But more most commonly, business tax returns are done on a cash basis.
SPEAKER_01:Yeah, yeah, obviously, cash basis is best, but we really look for consistency. So the only gap will be if you have your tax returns filed. So let's say we're looking at three years. If we have tax returns filed on an accrual basis for one year, but the other two basis is cash basis, okay. Is it gonna be on accrual, stay on accrual? If you're gonna be on cash, stay on cash.
SPEAKER_00:Okay. All right. So for step four, I have a question on the SBA personal financial statement. Should the applicant include the value of their business on their personal financial statement?
SPEAKER_01:We do not look for the value of the business. Does it matter to you? It matters, but we're not collecting that on the personal financial statement. We're really going to rely more heavily on the tax returns and the financial statements to tell us about the valuation of the business. And if we have to go deeper asking about the value of equipment and things like that, we'll do that separately. But the personal financial statement is really to see your value personally. Um, do you have any real estate? Do you have any stocks, bonds, any assets outside?
SPEAKER_00:You have real estate, furniture, anything that you own, anything that you own, and any debt that you have.
SPEAKER_01:Correct. So personal credit cards, personal lines of credit, unsecured personal loans. That's the information we're looking for on the personal.
SPEAKER_00:All right. So is there anything that normally trips them up on that step that you've seen, or is it pretty straightforward?
SPEAKER_01:Yeah, you know, one thing, Gene, that gets people pretty tripped up is the personal balance sheet because we're going to ask you to list out what assets you have versus what liabilities you have. Right. And people don't know a lot of the time. They have to do some due diligence. Okay. And so we help people understand well, what is your actual net worth and how do you calculate that?
SPEAKER_00:And you're defining net worth their assets less their liabilities. Personal. Correct. Not business personal. Okay. Um step five providing last three months personal bank statement. That seems to be obvious. Uh no one has issues with that. What if you see a lot of zeros, a lot of uh non-sufficient funds activity? Yeah, that's where we'll ask questions, right?
SPEAKER_01:So why are you bouncing checks? Yeah, yeah. And really, it's it's not to be critical, but it's it's to help you understand that we care about how you manage cash flow. Right. And if people struggle with, we want to provide you resources and support to help you do it better. That's all I let me ask you an aside.
SPEAKER_00:The the loan applications that you approve, do you make the assumption that how they handle their personal financial situation and their business financial are always the same? Or could they handle their business wonderfully? But on the personal side, they're a wreck.
SPEAKER_01:We've seen both of those scenarios, Gene. Yeah. So no case is the same. Um, it really is individually.
unknown:Okay.
SPEAKER_01:We like to make sure that people know we can see where your management may not be the best. We offer recommendations humbly. Uh, but but we try to make sure we give people credit where it's due as well.
SPEAKER_00:Yeah, but so theoretically you could say, hey, you got a great business, you got great cash flow, but we did our personal due diligence on you as an individual, and it doesn't look too good, dude.
SPEAKER_01:We we have to be honest like that, though. Yeah, because if the personal financial circumstance of the owner will negatively impact the business, that could cause us to have to decline the loan. I got it. So yeah, I'm gonna shy away from those conversations.
SPEAKER_00:Do you um a part of your due diligence on the seven steps is the checking their personal FICO score included in that?
SPEAKER_01:Yes, that is a part of the personal financial statement information and the loan application.
SPEAKER_00:Okay, so it behooves them to maybe clean up their FICO score before they come to see you.
SPEAKER_01:Yeah, and our minimum FICO score is about 640.
SPEAKER_00:Oh, that's good.
SPEAKER_01:That's good. That's what mine's about 639. Okay, okay, okay. So we'll we'll work with you and help you get that up.
SPEAKER_00:Okay. Uh um step six, the business financials, that's obvious. Uh, I I I I assume independent, let's just say they apply today. You'd want to see the balance sheet in PL for the fiscal year ending uh 1231, 2024. And the most current for 2025. Hopefully it's really current, maybe November.
SPEAKER_01:Yeah. Something like that. The end of November. Yeah, the specifically the last day of the month. So in this case, as November's the last month, it'll be November 30th.
SPEAKER_00:Yeah. And that that definitely would have to be on an accrual basis because most businesses have some kind of accounts payable and some kind of accounts receivable. And that's that's what accrued statements, as you know, pick up. All right, we're smooth, we're moving right along here. So on the business debt schedule, uh, I've had many clients that have been tripped up with this. What do you see often trips them up on this that just has you pulling your hair out?
SPEAKER_01:Yeah, people don't know the information about their debt, which is hard because we asked for specifics that you should know, but how often do you look at that kind of not often? We asked for your original date. When did you get this credit card or this this loan or this line of credit? Um, we asked for the interest rate, which is important to know. Yep, yep. We asked for how much your monthly payment is, which you should know. Um, but that can get people tripped up. And so we're patient. And so we we try to be intentional about making sure they know that.
SPEAKER_00:So if one of their debts on the on the business debt schedule, um, where you where they indicate that this loan is collateralized by my business assets, then from AMPAC standpoint or any commercial bank standpoint, that lender would have to pay, you have to be paid off to release their lien on the company axles because that's your collateral.
SPEAKER_01:Correct. That's correct. And we we we vocalize that. That's the biggest reason we go through the debt schedule process because at the end of the day, we trust you, but we're gonna be looking at what liens are on the business. And if we see liens on the business, we have to inquire about the debt agreement with that, yeah.
SPEAKER_00:Okay, well, I mean, so those are seven plus my one, eight steps that seem fairly simple for the individual, and if they do it with accuracy and clarity, there is a good chance that they may get their loan approved. Yes, and if not, I'm assuming because you're a lender with a heart and you're more lenient, you would kindly say, you know what, this is what's tripping you up. If you could fix this, come back and we'll take another look at it.
SPEAKER_01:That is exactly how we do it, Gene.
SPEAKER_00:A lot of banks don't do that. Yeah, okay. So that's great stuff. You mind if I ask you a few more questions, Brian? Of course, let's do it. So that's what we're here for. I know one of your uh most popular product, and certainly in the individual that's looking to maybe buy a facility or a a facil or an office rather than rent. Is the SBA 504 loan? Yes, sir. Um, to my knowledge, that's a fixed rate and it's only requires 10% cash down. That is correct. That's still correct. And what is the current rate right now?
SPEAKER_01:Yeah. So, and and one thing I always like to call out too, um, we're pretty intentional about keeping this rate um updated on our website. So uh for those who may be listening, if you ever, hey, what's the SP504 rate? Go on to www.ampact.com and you'll see it. Um, but as of November, um, this last month here, the 25-year rate is 5.86, which is which is really really you're talking a 25-year fixed rate for 5.16.
SPEAKER_00:5.86. 5.86. My God, is that a deal? Yeah, people should be standing in line. Yeah, I know. If I give them your card, will you give me a commission? Oh, that's of course.
SPEAKER_01:I love I love paying out commissions because that means somebody's getting help that I wouldn't have been able to help otherwise.
SPEAKER_00:So now if if um they still have to come up with the 10% cash, so on a$500,000 building, they come got to come up with$50,000. Can that$50 be gifted to them by somebody or lent to them by someone?
SPEAKER_01:It can be gifted, yes. It can be gifted as long as we have a gift letter that is absolutely within the scope of the 504 program.
SPEAKER_00:Okay, so if they have a sugar daddy, then they and that's willing to pony up the 10%, they ostensibly could get 100% financing on an asset.
SPEAKER_01:That's correct.
SPEAKER_00:All right, correct.
SPEAKER_01:Beautiful.
SPEAKER_00:All right, so let me shift gears a little bit, Brian. I know you're a wealth of knowledge. I want to take advantage while you're here. Um, how can a small business owner use AI and chat GBT effectively to assist in attracting business capital?
SPEAKER_01:Absolutely, absolutely. Yeah, so if a small business owner is looking to leverage AI to attract business capital, the thing that I always like to make sure to vocalize, you want to use AI like it's not just an assistant, but like it's an employee. You want to give it a very specific task, you want to give it an identity, um, specifically telling it it's an expert in the field of finance and access to capital is a huge component of any prompt for any AI tool. And as you continue the prompt, you want to detail specifically what you want it to tell you. Do you want it to tell you what products, what loan products are out there, what type of loan products they are, and what are their interest rates and terms? Those are the specifics you want to tell it, but also you want to tell it to tell you to ask it what you aren't asking it currently.
SPEAKER_00:Uh-huh. Okay. That would be the best information. What question would you recommend would be the most important prompt then?
SPEAKER_01:Yeah. So there are a couple. Um, the biggest thing, excuse me. So it's funny because there are so many prompts that you can do for access to capital, but the biggest one that I always recommend. Well, one that you would recommend if you were the loan applicant. Yeah, no, seriously. So if I was a loan applicant, this is what I recommend for for any applicant. You ask what type of capital is best to fit your current stage of business, and what do you need to qualify? The reason I notate that as a really good prompt is because the question invites the AI tool to give you questions back, like, hey, tell me about your business. What is the stage? How many years of tax returns? What do your financial statements look like? So it can help tailor responses and tell you exactly what you need to be able to qualify.
SPEAKER_00:Correct. So in that process, you would also get prep or what questions the bank would ask you or AMPAC would ask you. Exactly. I knew you would know the answer. That's what I'm talking about. Okay. So on a similar vein, how has AI impacted Ampac's business model?
SPEAKER_01:Yeah. Yeah, yeah. So we're actually leaning into AI as intentionally as we can. And so um I absolutely invite everyone to join our community, our entrepreneur ecosystem hub on the App Store, just type in Ampack Business Capital. But we've built out our own AI chatbot specifically for supporting individuals with questions like this. Um, and we're going to continue to leverage AI more intentionally. And we want to.
SPEAKER_00:That is awesome. Okay. Yeah. So let's so let's get to a street question then. What are the most common reasons, in your opinion, that AMPAC and the banks that you partner with decline down business loaners' requests?
SPEAKER_01:Yeah, that's a great question, Gene. So I'll share two most common reasons. The first most common reason the business doesn't cash flow for the loan because they don't know what that means. They don't know what cash flowing for a loan means. And in a nutshell, it means you have to have enough net income, NOI, net operating income to cover the cost of the loan. That's the primary reason, Gene.
SPEAKER_00:Can you add depreciation to the net income?
SPEAKER_01:Yes, we do do that as an ad back. We add depreciation and we add interest. Okay. But the the key component there is more often than not, tax filings are not reported in a way that's favorable for the business to access capital. They'll report a net loss and not have enough cash showcase to be able to qualify for the loss. Yeah, yeah. Okay. The second most common one, Gene, is the credit profile. Um, 640 is a small, smaller minimum, but it is still a minimum. And so we still have to work with business owners that just aren't at that level yet of a 640, but they're gonna be getting there. And so we support them in that. But the care is the credit profile.
SPEAKER_00:If they work on their FICA score, they're gonna get a cheaper interest rate for their loan. Exactly. If they don't, then they may be paying 15, 16, 18, 20 to an alternative lender. It yes, Gene. Yes. Okay, got it. So, what other services does AMFAC provide for the small business community? Absolutely.
SPEAKER_01:Yeah, so through the entrepreneur ecosystem that I notated here, we actually do provide what we call holistic support services. So I love that word. Yes, sir. Yes, sir. So we have uh entrepreneurship incubator programs, we host weekly office hourslash CEO roundtables for business owners. Wow, you were awesome. Wow. Yes, sir. And and we actually leverage um great partners, including partners like the Lone Doctor, to make sure individuals are getting connected to professionals that can help guide them intentionally. And that's based on what kind of guidance you need. So if you need, yeah, accounting guidance, bookkeeping guidance, tax filing guidance, insurance guidance, marketing, AI. Um, we have a plethora of community members within our app that are available to serve and they want to be connected to business owners that have these kinds of questions. So it's about community.
SPEAKER_00:That is just I had no idea, Brian. I mean, it's like um you're a uh five-star restaurant and the menu is loaded. The menu could say, You want money? Yeah, you want counseling, yeah. You want per advisory group services, yeah. So that is that is great. That is great, and it's all designed to make businesses healthier. That's correct.
SPEAKER_01:That's correct. And we offer all of our services free of charge, and so we want to continue to do that.
SPEAKER_00:Okay, so um, I mean, we're going along really quickly here. Um can you give me a summary statement of our meeting today? Sort of a takeaway that you would want my listeners to understand um and focus on.
SPEAKER_01:Absolutely.
SPEAKER_00:Regarding to the loan application process and the seven steps.
SPEAKER_01:Yeah. So when you're looking at any loan application, just remember access to capital, it can be as easy as ABC. You want to make sure you qualify from the standpoint of cash loan credit, um, but understand what kind of information you need to be able to provide, right? So navigate what you're using the funds for intentionally. Make sure that you have your financial statements in order, historical tax returns and interim, which are financial statements like profit and loss statements and balance sheets. And one, most importantly, make sure that you're willing to do the work to find the information. Like what debt does my business have? When did I get this credit card? What is the interest rate? What is my monthly payment? Right. And don't be afraid to ask for help. That's the most important takeaway I want to leave.
SPEAKER_00:Can they contact you for help?
SPEAKER_01:They absolutely can, Jean. I am available and ready to serve everyone.
SPEAKER_00:Wow, so you could be their pre-loan consultant. That's correct. You're taking my job. No, because I'm gonna make sure they're working with you. It's okay. All right, so Brian, is there anything you'd like to add other than that statement? Anything other thing that I should have asked you that you would like to say on behalf of small business owners that want to scale the business and they're looking for money.
SPEAKER_01:Is there anything else? I also want to add if you haven't worked with the loan doctor already. Oh, please stop it. Listen out. And if you're not subscribed to CEO Terrainmaker, you are absolutely missing out on tons of value. Oh continue.
SPEAKER_00:They're gonna kill me on YouTube. This is a setup.
SPEAKER_01:I was not paid for this advertisement. Well, this is genuine, genuine rapport. Gene Valdez, I do want to applaud you for your history of serving small businesses.
SPEAKER_00:Well, as long as I don't get into politics and morality and religion, I will say this. I'm pretty darn good at what I do. Yes, sir. You are. All right. So, what is the best way to get a hold of you? Should we call the local bar, the 19th hole at a golf course? What how do we do a hold of you?
SPEAKER_01:Not the local bar. Is Brian there? Yeah. But you can reach me directly. Um, my cell phone number is 909-816-6847. Um, you can reach me via email at bkennedy junior at ampac.com or check us out online at www.ampak.com. We'd be honored to serve you.
SPEAKER_00:So if they call CAI, I want to talk to the ecosystem guy. They they they know who they are. Everybody knows who you are.
SPEAKER_01:They and that is that is what we want, Gene. Your friendly neighborhood ecosystem.
SPEAKER_00:All right. Well, Brian, you've been wonderful. Thank you very much for all of your time. And um you have a happy holidays to you and your family. Thank you. And the same for my listeners, and um, that's a wrap. So peace and love, and I'm out. Blessings. Bye bye now. Have a good one, everyone.