Subject: Disability business loan

Here is information from the U.S. Small Business Administration I
think would be of interest to people with disabilities.  The
first section is about the Handicapped Assistance Loan program.
The second section is a set of the most common questions and
answers about starting a business.  More information may be
obtained from the web site www.sbaonline.sba.gov .

Jamal Mazrui
National Council on Disability
Email: 74444.1076@compuserve.com

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 HANDICAPPED ASSISTANCE LOANS                      1/95

 THE PROGRAM

Disabled individuals and public or private nonprofit organizations for the
employment of the handicapped can get U.S. Small Business Administration
(SBA) financing for starting, acquiring or operating a small business. The
loans are available under the Handicapped Assistance Loan Program.

 ELIGIBILITY

Public or Private Nonprofit Organizations (HAL-1)

Financial assistance is available to state and federal chartered
organizations that operate in the interest of disabled individuals.
Eligibility rules specify that the net income of the applying organization
cannot benefit any stockholder or other individual, and that at least 75
percent of the direct work involved must be done by handicapped persons.

To establish HAL-1 eligibility, applicants must provide evidence that the
business is operated in the interest of handicapped individuals. The
evidence may consist of copies of by-laws, incorporation papers,
certification of tax-exempt status as determined by the Internal Revenue
Service, or recognition and approval by the U.S. Secretary of Labor or a
state vocational rehabilitation agency.


 Handicapped Individuals (HAL-2)

To be eligible for loans under the HAL-2 program, handicapped individuals
must provide evidence of the following:

     Their business is a for-profit operation and qualifies as small under
the SBA's size standard criteria. Loans cannot be made to businesses
engaged in speculation or investment in rental real estate.

     The business must be 100 percent owned by one or more handicapped
individuals. A handicapped individual is a person who has a permanent
physical, mental or emotional impairment, defect, ailment, disease or major
disability. Applicants must show that their disability keeps them from
competing on a par with non-handicapped competitors.

     The handicapped owner(s) must actively participate in managing the
business. Applications that propose absentee business ownership are not
eligible.

Whether the business is organized as a proprietorship, a partnership or a
corporation is not a determining factor with respect to eligibility as a
small business.


 AMOUNT AND INTEREST RATES

The SBA can guarantee up to $750,000 of a loan made by a private lending
institution. Direct loans from the SBA are limited to $150,000.

Interest rates on direct loans are 3 percent per year. Interest rates on
guaranteed loans are negotiated with the private lending institution and
must be legal, reasonable and within a maximum allowable rate established
by SBA. No direct loan can be approved if a guaranteed loan is available.

The SBA will not provide financial assistance if funds are otherwise
available from the applicant's own resources, from a private lending
institution, or through financing by a government entity other than the
SBA.

HAL-1 loan proceeds may be used for most business purposes. They may not be
used for supportive service expenses such as subsidized wages of low
producers, health and rehabilitation services, management, training,
education and housing of handicapped workers and other such uses.

 Maturity

The loan maturity depends on the ability of the business to repay, subject
to the requirements of prudent lending practices and the SBA's regulatory
maximums. Machinery and equipment cannot be financed for periods longer
than their conservative economic life. Real estate and construction loan
maturities generally cannot exceed 25 years. Working capital maturities
generally cannot exceed seven years.


 Collateral

Collateral requirements for all HAL loans are the same as SBA's regular
program. Generally, collateral is required to the extent it is available
and in value sufficient to secure the loan. Direct or immediate
participation loans will be subordinate to perfected security interests
held by financial institutions arising from the borrower's past borrowings.
This provision does not apply to past borrowings from individuals.


 BASIS FOR LOAN APPROVAL

Nonprofit organizations must have the capability and experience to
successfully produce or provide marketable goods and services.

An evaluation of the experience, competency and ability of the owners and
operators of the small business must indicate that they can operate it
successfully and can repay the loan from business earnings.


 ADDITIONAL INFORMATION

The SBA has a number of programs and services available. They include
training and educational programs, advisory services, publications,
financial programs and contract assistance. The agency also offers
specialized programs for women business owners, minorities, veterans,
international trade and rural development.

The SBA has offices located throughout the country. For the one nearest
you, consult the telephone directory under "U.S. Government," or call the
Small Business Answer Desk at 1-800-8-ASK-SBA or (202) 205-7064 (fax). For
the hearing impaired, the TDD number is (202) 205-7333.

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COMMON QUESTIONS AND ANSWERS ABOUT STARTING A BUSINESS


1.   Do I have what it takes to own/manage a small business?

     You will be your own most important employee, so an objective appraisal
     of your strengths and weaknesses is essential.  Some questions to ask
     yourself are:  Am I a self starter?  How well do I get along with a
     variety of Personalities?  How good am I at making decisions?  Do I have
     the physical and emotional stamina to run a business?  How well do I
     plan and organize?  Are my attitudes and drive strong enough to maintain
     motivation?  How will the business affect my family?


     2.   What business should I choose?

     Usually, the best business for you is the one in which you are most
     skilled and interested.  As you review your options, you may wish to
     consult local experts and businesspersons about the growth potential of
     various businesses in your area.  Matching your background with the
     local market will increase your chance of success.


     3.   What is a business plan and why do I need one?

     A business plan precisely defines your business, identifies
     your goals and serves as your firm's resume.  Its basic
     components include a current and performance balance sheet, an
     income statement and a cash flow analysis.  It helps you
     allocate resources properly, handle unforeseen complications,
     and make the right decisions.  Because it provides specific
     and organized information about your company and how you will
     repay borrowed money, a good business plan is a crucial part
     of any loan package.  Additionally, it can tell your sales
     personnel, suppliers and others about your operations and
     goals.


     NOTE:  A complete online training module on how to develop a
     business plan can be found in the TRAINING MENU of SBA ONLINE.


4.   Why do I need to define my business in detail?

     It may seem silly to ask yourself, "What business am I really
     in," but some owner-managers have gone broke because they
     never answered that question.  One watch store owner realized
     that most of his time was spent repairing watches while most
     of his money was spent selling them.  He finally decided he
     was in the repair business and discontinued the sales
     operations.  His profits improved dramatically.
5.   What legal aspects do I need to consider?

     Licenses required, zoning laws and other regulations vary from
     business to business and from state to state.  Your local
     Small Business Administration (SBA) office and/or chamber of
     commerce will provide you with general information, but you
     will need to consult your attorney for advice specific to your
     enterprise and area.  You also must decide about your form of
     organization (corporation, partnership or sole proprietorship)
     or tax status (e.g., should you opt for a Subchapter S status?).



     6.   What do I need to succeed in a business?

     There are four basics of success in small business:

          *Sound management practices.
          *Industry experience.
          *Technical support.
          *Planning ability.

     Few people start a business with all of these bases covered.
     Honestly assess your own experience and skills; then look for
     partners or key employees to compensate for your deficiencies.
7.   Would a partner(s) make it easier to be successful?

     A business partner does not guarantee success.  If you require
     additional management skills or start-up capital, engaging a
     partner may be your best decision.  Personality and character,
     as well as ability to give technical or financial assistance,
     determine the ultimate success of a partnership.
8.   How can I find qualified employees?

     Choose your employees carefully.  Decide beforehand what you
     want them to do.  Be specific.  You may need flexible
     employees who can shift from task to task as required.
     Interview and screen applicants with care.  Remember, good
     questions lead to good answers-the more you learn about each
     applicant's experience and skills, the better prepared you are
     to make your decision.
9.   How do I set wage levels?

     Wage levels are calculated using position importance and skill
     required as criteria.  Consult your trade association and
     accountant to learn the most current practices, cost ratios
     and profit margins in your business field.  While there is a
     minimum wage set by federal law for most jobs, the actual wage
     paid is entirely between you and your prospective employee.
10.  What other financial responsibilities do I have for employees?

     You must withhold federal and state income taxes, contribute
     to unemployment and workers compensation systems, and match
     Social Security contributions.  You may also wish to inquire
     about key employee life or disability insurance.  Because laws
     on these matters vary from state to state, you probably should
     consult local information sources and/or SBA offices.
11.  What kind of security measures must I take?

     Crimes ranging from armed robbery to embezzlement can destroy
     even the best businesses.  You should install a good physical
     security system. Just as important, you must establish
     policies and safeguards to ensure awareness and honesty among
     your personnel.  Because computer systems can be used to
     defraud as well as keep records, you should check into a
     computer security program.  Consider taking seminars on how to
     spot and deter shoplifting and how to handle cash and
     merchandise; it is time and money well spent.  Finally,
     careful screening when hiring can be your best ally against
     crime.
12.  Should I hire family members to work for me?

     Frequently, family members of the owner "help out in the
     business."  For some small business owners it is a rewarding
     experience; for others it can cause irreparable damage.
     Carefully consider their loyalty and respect for you as the
     owner-manager.  Can you keep your family and business
     decisions separate?
13.  Do I need a computer?

     Small business today faces growing inventory requirements,
     increased customer expectations, rising costs and intense
     competition. Computers can provide information that leads to
     better returns on investment.  At the same time, they help you
     cope with the many other pressures of your business.
     Computers are not cure-alls, however, and considerable care
     should be given to:

          (1) deciding if you need one, and
          (2) selecting the best system (or personal computer) for
              your business.
14.  What about telecommunications?

     All small businesses share some common functions: sales,
     purchasing, financing, operations and administration.
     Depending on your individual business, telecommunications can
     support your objectives in any or all of these areas.  In its
     basic form, the telephone (the terminal) and the network
     (local or long distance) make up the basic components of
     telecommunications.  It is an effective tool that can easily
     change with seasonality and growth.  How you use
     telecommunications can affect how efficiently and profitably
     your company grows in the future.
15.  How much money do I need to get started?

     Once you have taken care of your building and equipment needs
     you also must have enough money on hand to cover operating
     expenses for at least a year.  These expenses include your
     salary as the owner and money to repay your loans. One of the
     leading causes of business failure is insufficient start-up
     capital. Consequently, you should work closely with your
     accountant to estimate your cash flow needs.
16.  What are the alternatives in financing a business?

     Committing your own funds is often the first financing step.
     It is certainly the best indicator of how serious you are
     about your business. Risking your own money gives confidence
     for others to invest in your business.  You may want to
     consider family members or a partner for additional financing.
     Banks are an obvious source of funds.  Other loan sources include
     commercial finance companies, venture capital firms, local
     development companies and life insurance companies.  Trade
     credit, selling stock and equipment leasing offer alternatives
     to borrowing.  Leasing, for example, can be an advantage
     because it does not tie up your cash.  Ask your local SBA
     office for information about these various sources as well as
     materials produced by SBA including publications such as "Focus
     on the Facts".
17.  What do I have to do to get a loan?

     Initially, the lender will ask three questions:
          *How will you use the loan?
          *How much do you need to borrow?
          *How will you repay the loan?

     When you apply for the loan, you must provide projected
     financial statements and a cohesive, clear business plan which
     supplies the name of the firm, location, production
     facilities, legal structure and business goals.  A clear
     description of your experience and management capabilities, as
     well as the expertise of other key personnel, will also be
     needed.
18.  What kind of profits can I expect?

     Not an easy question. However, there are standards of
     comparison called "industry ratios" which can help you
     estimate your profits.  Return on Investment (ROl), for
     example, estimates the amount of profit gained on a given
     number of dollars invested in the business.  These ratios are
     broken down by Standard Industrial Classification (SlC) code
     and size, so you can look up your type of business to see what
     the industry averages are.  These figures are published by
     several groups, and can be found at your library.  Help is
     also available through the SBA and the trade associations that
     serve your industry.
19.  What should I know about accounting and bookkeeping?

     The importance of keeping adequate records cannot be stressed
     too much.  Without records, you cannot see how well your
     business is doing and where it is going.  At a minimum,
     records are needed to substantiate:

     1.   Your tax returns under Federal and State laws,including
          income tax and Social Security laws;

     2.   Your request for credit from vendors or a loan from a
          bank;

     3.   Your claims about the business, should you wish to sell
          it.

     But most important, you need them to run your business
     successfully and to increase your profits.
20.  How do I set up the right record keeping system for my
     business?

     The kind of records and how many you need depend on your
     particular operation.  The SBA's resources and an accountant
     can provide you with many options.  When deciding what is and
     is not necessary, keep in mind the following questions:

          1.    How will this record be used?

          2.    How important is this information likely to be?

          3.    Is the information available elsewhere in an
                          equally accessible form?
21.  What financial statements will I need?

     You should prepare and understand two basic financial
     statements:
          (1) the balance sheet, which is a record of assets,
          liabilities and capital; and

          (2) the income (profit and loss) statement, a summary of
          your earnings and expenses over a given period of time.
22.  What does marketing involve?

     Marketing is your most important organizing tool.  There are
     four basic aspects of marketing, often called the "four P's":

     *Product: The item or service you sell.

     *Price:   The amount you charge for your product or service.

     *Promote: The ways you inform your market as to who, what and
               where you are.

     *Provide: The channels you use to take the product to the
               customer.

     As you can see, marketing encompasses much more than just
     advertising or selling.  For example, a major part of
     marketing involves researching your customers:  What do they
     want?  What can they afford?  What do they think?  Your
     understanding and application of the answers to such questions
     play a major role in the success or failure of your business.
23.  What is my market potential?

     The principles of determining market share and market
     potential are the same for all geographic areas.  First
     determine a customer profile (who) and the geographic size of
     the market (how many).  This is the general market potential.
     Knowing the number and strength of your competitors (and then
     estimating the share of business you will take from them) will
     give you the market potential specific to your enterprise.
24.  What about advertising?

     Your business growth will be influenced by how well you plan
     and execute an advertising program.  Because it is one of the
     main creators of your business' image, it must be well planned
     and well budgeted.  Contact local advertising agencies or a
     local SBA office to assist you in devising an effective
     advertising strategy.
25.  How do I set price levels?

     The price of a service or item is based on three basic
     production costs: Direct materials, Labor and Overhead.  After
     these costs are determined, a price is then selected that will
     be both profitable and competitive.  Because pricing can be a
     complicated process, you may wish to seek help from an expert.
26.  Are some locations better than others?

     Time and effort devoted to selecting where to locate your
     business can mean the difference between success and failure.
     The kind of business you are in, the potential market,
     availability of employees and the number of competitive
     establishments all determine where you should put your
     business.
27.  Is it better to lease or buy the store (plant) and equipment?

     This is a good question and needs to be considered carefully.
     Leasing does not tie up your cash; a disadvantage is that the
     item then has no resale or salvage value since you do not own
     it.  Careful weighing of alternatives and a cost analysis will
     help you make the best decision.
28.  Can I operate a business from my home?

     Yes. In fact, experts estimate that as many as 20 percent of
     new small business enterprises are operated out of the owner's
     home. Local SBA offices and state chambers of commerce can
     provide pertinent information on how to manage a home-based
     business.
29.  How do I find out about suppliers/manufacturers/ distributors?

     Most suppliers want new accounts. A prime source for finding
     suppliers is the Thomas Register, which lists manufacturers by
     categories and geographic area.  Most libraries have a
     directory of manufacturers listed by state. If you know the
     product line manufacturers, a letter or phone call to the
     companies will get you the local distributor-wholesaler.  In
     some lines, trade shows are good sources of getting suppliers
     and looking over competing products.
30.  Where can I go for help?

     The U.S. Small Business Administration has offices in nearly every major
     city in the country.  SBA's Office of Business Initiatives operates
     the toll-free "Answer Desk" at 1-800-8-ASK-SBA, to give callers direct
     referral to appropriate sources of information.  Sponsored by SBA are a
     variety of counselling, training and information services including the
     Service Corps of Retired Executives (SCORE), Business Information
     Centers (BICs) and Small Business Development Centers (SBDC). In ad-
     dition, procurement center representatives can be found at each major
     military installation.  More than 2,700 chambers of commerce are located
     throughout the country to provide additional assistance.
31.  What do I do when I'm ready?

     You have done your homework: you have a complete business
     plan; you know where you want to operate; you know how much
     cash you will need; and you have specific information on
     employee, vendor and market possibilities.  You now may want
     someone to look over your plans objectively.  Contact the
     business department at a local college for another opinion.
     A SCORE representative at the Small Business Administration
     can also review your work and help with the fine tuning.
     Then, when you have made the final decision to go ahead, it is
     time to call the bank and get going.  Good luck!

     All of SBA's programs and services are extended to the public
     on a nondiscriminatory basis.
