Business financing tips for Hispanic small business owners

Do you have a great idea for a new business but don't know where to turn to when it comes to funding, or do you want to grow your business but aren't sure how to go about getting more financing? According to Louis Barajas, a Los Angeles-based financial planner and business management consultant with over 20 years of experience, the first thing you need is a business plan, a business "blueprint" of sorts. Barajas' area of expertise is advising Latino-owned businesses and he is the author of several best-selling books, including Small Business, Big Life: Five Steps to Creating a Great Life With Your Own Small Business and The Latino Journey to Financial Success.

The business plan doesn't need to be a 20 to 30-page long detailed account of the market and the competition, what it does need to be is a financial forecast. "It's more [a projection] of what it's going to take to start the business and be able to get your first product or service out." And the key, adds Barajas, is to "work backwards" when you're starting out. "Decide what it is that you need to get things going, such as how many computers, scanners, and printers you'll need, whether you need to lease a space, whether you're having any employees and how many. At a minimum, that's what you'll need to do, and write costs beside each item and then add 25 percent (because operating costs are always more than you think they'll be). That's why you want to think backwards, because it doesn't make sense to have $10,000 when you need $20,000."

Finding the funds

Once you have the plan mapped out, you'll get to what most entrepreneurs believe is the hardest part of all: financing the business. Be careful with funding the business via credit cards as those can carry high-interest rates. Advisors say that you need to assess what you already have available. Do you have any savings? Are there family members or friends willing to lend you the money? According to Barajas, this can be particularly tricky for Latino entrepreneurs because many don't come from a background where funds are readily available to start a business. Fortunately, there are programs available that can help.

Free financing resources right at your fingertips

The U.S. Small Business Administration is the best place to turn to for information on financing when you're just starting out. If you don't need a lot of capital initially, you can apply for what is called a microloan, which typically consists of $50,000 or less. The loans can be usually paid off within six years and the interest rate is much lower than using a credit card. This is especially helpful for Latinos who may "not have a lot of money but have a great idea," says Barajas.

"A microloan is good if you don't want to go to an investor and it's usually for businesses that are providing a service, such as opening up your own tax consulting business, for instance. Product providers usually have higher needs for capital." When it comes to these microloans, the SBA provides funds to designated community-based groups and other non-profits which then lend out the money.

One little-known SBA program, Score.org, offers free consulting from retired entrepreneurs, accountants, and other business leaders who can help you every step of the way through mentoring and other business education, including looking at financing options. Score helped more than 30,000 small businesses just in the last year.

Another opportunity for small business financing is Accion.org, a non-profit group based in California that began financing smaller projects in Latin America in the 1960s. It has grown to help small businesses in the United States and provides some funds to low-income business owners.

Taking it to the next level

If the financing you need is more than a microloan would cover, put together a financial statement before you start looking for financing options. The statement would need to show profit and loss, income, and a balance sheet. "Some people come with no financial statement and they put that on the back burner, and you really should get an accountant who is really familiar with the business. Whenever you're going to ask anyone for money, whether it's a private investor or a bank, they're going to ask for financial statements."

Join the club

Joining an organization in your particular industry can help you establish and grow your business, and it's an option that entrepreneurs often overlook. "You get ideas and learn a lot from these organizations and the conferences they have, as well as talking to fellow members. There's a lot of knowledge [to be learned by] going to these conferences. The problem is that [business] owners don't have enough time but they need to make the time," says Barajas.

But what about bad credit

If your credit is less than ideal, there are ways to clean it up, and faster than you think. According to Barajas, "You can create an action plan, look at the credit report and see what's causing the problem, and with some work you can actually increase your credit score by 100 points within six months. Contact the vendors and see what can be done [to fix the problem causing the low score] and within a year you can actually clean up your credit report."