Report to USAID/LIFE Program

Consultations to Develop Startup Loan

Process for Makhzoumi Foundation

Ms. Amanda Gant and Mr. Eric Insler – FSVC Volunteer Experts
August 14-18, 2017

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 Consultations to Develop Startup Loan Process for Makhzoumi Foundation

August 14-18, 2017

Beirut, Lebanon

FSVC volunteer experts:

- Ms. Amanda Gant – FSVC volunteer expert and Loan Officer with the Latino Economic
Development Center (LEDC)
- Mr. Eric Insler – FSVC volunteer expert and Independent Consultant

At the request of the Financial Services Volunteer Corps (FSVC), volunteer experts Mr. Eric
Insler – FSVC volunteer expert and Independent Consultant and Ms. Amanda Gant – FSVC
volunteer expert and Loan Officer with the Latino Economic Development Center (LEDC)
visited Beirut, Lebanon on August 14-18, 2017 to support the development of a loan product and
program for startup businesses at Makhzoumi Foundation’s (MF) Microcredit Department.

Objectives:
- Develop a startup loan product for MF
- Develop a startup loan application
- Develop outline and needs of a startup support/training/development program

Recommendations:

1. MF should adapt their current business training program to serve the needs of individuals
seeking to start new businesses

• Many people with ideas for new businesses do not have the market knowledge
necessary to acquire a loan and effectively manage and grow the business
• MF has a business training program, but it needs to be updated to provide the
necessary and targeted training for loan attainment and new business management
• At the conclusion of the training program participants will be able to complete the
new business loan application
• See Day 2 for more specific recommendations on the content and structure of the
training program

2. Entrepreneurs will require more support than traditional borrowers

• Training program that is designed specifically to address elements of business
plan design and execution
• Mentoring from experienced entrepreneurs
• Follow-up visits and coaching from loan officers, with an emphasis on tracking
financial results and giving advice to improve operations and meet financial goals
• Consider offering an online evaluation tool through which aspiring entrepreneurs
can answer questions and receive feedback on what field or industry would be
most appropriate for them, given their skills and interests.

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 Example: https://www.whatcareerisrightforme.com/career-aptitude-test.php
• See Day 2 for more suggestion on supporting startup entrepreneurs

3. The startup lending product will vary in a few key aspects from MF’s current loan
products
• Loan amounts will be higher (1,000 USD+) to accommodate the needs for assets
and working capital specified in the entrepreneurs’ business plans
• Administrative fees will be the same, respective to loan amount
• Consider allowing a small extension of grace periods (up to three months), and
cover the risk by requiring the payment of administrative fees during this period
• Continue to require a strong guarantor

4. MF should amend their loan application in order to ask information about the formation
and operations of new businesses
• The sections focusing on the business plan should have specific questions and
tables, not many free form questions, so that loan officers receive the information
that they need to make an evaluation and so that they do not need to ask a lot of
follow-up questions
• The loan application should be updated to include sections on finances, operations
and labor plan, and marketing
• Training program participants will be asked to complete the application prior to
the training program, to the best of their ability, and to complete the application at
the conclusion of the training program, thus showing the client, the loan officer,
and MF in general the progress made
• See Day 3 for more specific details on the content of the revised application for
startup loans
• See Annex 2 for a chart that can help loan officers evaluate business plans

5. The new startup product is best marketed to certain groups of people in Lebanon
• University students in their final year and recent university graduates
• Current MF microcredit beneficiaries
• Participants in MF vocational training programs
• People living in rural settings who produce traditional processed foods and other
products
• See Day 4 for more detailed information on the marketing of the new startup loan
product and training program

6. MF should only lend to startups that have attained “proof of concept” – verification that
there will be sufficient demand for their products and services

More likely to have proof of concept Less likely to have proof of concept
Startups with existing products but new sales Startup with existing product but new
channels branding/marketing
Startups with light asset-based services Tech startups

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 Retail (sales/marketing innovation), inventory
financing
Non-asset based services if entrepreneur has
high experience and market has a low supply
Arts and handicrafts
Non-asset based services if entrepreneur has
low experience and market has a high supply
New products not on market

See Day 1 for more detailed information on “proof of concept” and ideal business models
for the new startup loan product

7. Startup loans are riskier since the new business may not be successful, so unique risk
mitigation techniques are necessary for MF
• Continue relying on relationship between the loan officer and the borrower
• Set range for amount of startup capital that the loan is providing (recommended
between 35% and 65%)
• Prefer borrowers with additional streams of household income (spouse, other
income generating businesses, etc.) and fewer household expenses (fewer
children, less debt, etc.)
• Ensure that the loan repayment is not too large of a percent of the new business’s
gross margin
• Accept cash as collateral for startup loans, to be held in collateral until the loan
has been repaid
• Do not fund startups with many different owners/investors. These businesses are
more prone to conflict, and investors may pressure the borrower to pay them
profit share before the loan is repaid.
• See Day 4 for more best practices for small business lending and more
information credit risk management

8. See Day 4 for a detailed project implementation plan/roadmap

The following pages contain a summary of the four days of consultations and include more
detailed recommendations and work products for the recommendations listed above:

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Summary of Consultations

Day 1
FSVC met with Makhzoumi Foundation (MF) Program Administration Manager Mr. Vartkes
Keutelian on Day 1 to refine the schedule of the consultation, discuss the MF startup strategy and
program and identify goals and deliverable for the week.

History of micro-credit program at MF-

- From 1998-2009 the microcredit program extended throughout Beirut and suburbs
- In 2009 the microcredit program expanded outside Beirut in order to diversify portfolio
- In 2010 United states Agency for International Development/ Lebanon Investment in
Micro-Finance (USAID/LIM) program started
- MF recruited more loan officers in areas where MF already had training centers
established (for vocational training)
- MF now employs 10 loan officers (5 in Beirut, 2 in Tripoli and 3 in the Bekaa region)
- MF portfolio is currently comprised of 3% startup loans

Objective of consultation- Developing startup lending program including:

- Design of startup loan product which includes loan terms, lending eligibility (a minimum
viable product that is able to be piloted)
- Startup support program (technical assistance and mentoring program) including 1)
training (modules according to level of entrepreneur), 2) mentorship (by loan officers
who undergo training of trainers programs) and 3) material (tools, graphics etc.)
- Targeted loan application
- Long term goals: increase startup lending to 7% by end of 2018

What qualifies MF to lend to startups?

- Combination of financial services and non-financial services
- Impact based monitoring of startups by MF staff
- Availability of vocational training
- Availability of entrepreneurship training
- Outreach capacity: accessibility to MF centers around Lebanon
- The mission driven increase of borrowers to boost economic development (transforming
startups into established businesses)
- Need for market diversification
- Traditional business startups are underserved

Challenges/Fears-
- MF not being able to change the share of startup loans in their portfolio
- Not being able to formulate a participatory plan that successfully engages startups.

Milestones-

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 - Number of loans: from 3% of portfolio to 7% by end of 2018
- MF becomes a solution provider to traditional startup businesses in Lebanon
- Have at least 35% women startup clients by end of 2018

MF Credit process-

Call for appointment

Signature of payment
On-site visit to business
slips and issue check for
by loan officer
payment

Call applicant to inform of Filing application (1 hour

decision for the first 9 pages)

MF Credit Committee Last page of including the

revises application and recommendation is filled
issues decision by Loan Officer

MF Underwriter analyzes
loan application and sets
recommendation for loan
committee

What will MF take into consideration when assessing loan application for startup businesses?
- Startup owner has other income or business
- Character assessment
- Cash flow of business
- Assets
- Business plan
- Skills (CV) and knowledge

MF can work on helping entrepreneurs build evidence/proof with little or no investment and this
will assist MF in deciding whether to give a startup loan or not (assist with business plan
development or market study - mentoring).

MF startup business analysis exercise-

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During the meeting, the team discussed how MF can assist startup businesses in becoming loan
clients. One way identified would be to help the segment of clients who have no proof of concept
to develop one through market research, planning their financial projections, and even creating
minimum viable products. The chart below shows the steps that could be taken to train portions
of MF’s current clients to be fundable.

100 Entrepreneurs
20 with Proof of Concept (PoC) 80 without PoC
30 unwilling to
20 with PoC 50 without PoC
fill loan application
20 with PoC 50 Business Plan Development X
25 do not
20 with PoC 25 develop PoC
develop PoC X
45 with PoC X X

What type of startup businesses should MF lend to? This chart was developed in discussion with
Vartkes and Sawsan and explores general categories of businesses and which categories would
be interesting for MF to lend to.

Probably lend Probably reject

Startups with existing products but new sales
channels
Startups with light asset-based services
Retail (sales/marketing innovation) inventory
financing
Non-asset based services if entrepreneur has
high experience and market is in low supply
Startup with existing product but new
branding/marketing
Tech startups because PoC is difficult and
cash flow is low
Crafts
Non-asset based services if entrepreneur has
low experience and market is in high supply
New products not on market

Day 2
In the morning FSVC volunteers met with Ms. Sawsan Chabro, Mr. Vartkes Keutelian and in the
afternoon with Ms. Wafa AlMasri.

Business models for startups that are favorable to MF-

- Startup has experience in a certain sector and decides to open a similar business and
independently operate
- Business or owner has revenue stream whether from employment or from family
- Startups which start small for small loan sizes not big because MF loans are micro.

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MF has a loan product for non-productive women to make them productive-
1. Characteristics:
- Between 500 and 1500USD
- Women can take up to 2 loans without being productive
- Women have to undergo entrepreneurship and soft skill training as a condition
- If they need a third loan it has to be a business loan
2. Challenges:
- Only 10 loans made
- Women refuse to take training
3. Need:
- Assist MF with marketing and adapting the training curriculum (market loan and program
support)

Discussion on how to support startups-

- MF also faces challenges in helping aspiring entrepreneurs identify what type of business
they want to start: a short program can help with that.
- MF wants them to take loans but also succeed
- Maybe can ask aspiring entrepreneurs to take microloan while taking training, or require
the training before disbursing the loan
- Also marketing it as by the conclusion of training can apply for bigger loan
- Market to university graduates – to engage youth in economy. Plus they have the time
and are experts in a sector.
- University graduates are 50% of startup clients

MF’s current entrepreneurship training program-

- Difficult to evaluate success since the program started just at the beginning of 2017
- Mostly those who are not serious about starting a business have attended.

Approaches discussed to encourage participation in startup program and product–

- The best idea is to target the market who is more committed to starting a business
- Startup entrepreneurs who are already coming to MF, but do not yet have good business
plans will be directed to participate in the MF startup program
- Once every one or two years have mass entrepreneurship training for university and
vocational school graduates. The ones who finish the training can apply for a startup loan.
Help guide startups to what they want to work in.
- Definitely target young people
- Host a workshop to help people with tools to identify which sector they should start their
business. Great article with a big list of small business ideas:
https://www.entrepreneur.com/article/80684
- Training program length: as short as possible to accomplish the goals
- Bring in community members and champions as a draw for people to attend
- Consider including a networking event
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Business Model Canvas created for MF’s proposed Startup Program -

Partners Activities Value proposition (What is Customer relationships (How to Customer

added value for the MF interact with customers before Segments (Who
Recruitment Assistance with Entrepreneurship program) joining program until after loan to market to)
partners: filling training payment)
application If you pass program even Proactive
Berytech without loan it will boost Word of mouth and in-person (#1) customer who
Market study success percentage tends to be
AltCity Community building events younger
Proof of concept Higher chance to get loan
Universities Dedicated personal relationship (loan She’s
Financial Customer and product officer or trainer) Entrepreneur:
Other planning and experience (ideas and 18-35 (emphasis
startup literacy including network) Social media (FB followers over on 18-25)
communities creating pro- 100k)/online presence
forma income Business to business Existing business
Other statement networking Email newsletters and with a new
vocational announcements product or
training Training on Gain skills: to develop PoC, branch of
centers filling loan monthly income statement, existing
application average revenue, cost, general business, entire
Service overhead expenses, business new business
partners: Assisting clients plans, market study and work
select their plan (who will work with Anyone who has
Banks business sector them). a very small
(lower fees prototype.
for opening Resources With MF menu of sectors Channels (Ways to market)
bank youth identify career planning Retired clients
accounts) Human capital Delivery channels: with experience
and expertise of On-site courses
the trainers Retail
Online courses Food
Curriculum Agriculture
Blending (online and meet-ups) to Trade
Funding streams target youth and employed Health/wellness

Loan officers

Recruitment Channels:
See partners
Online application
Social media
One-on-one outreach
Word of mouth (empower current
clients to send referrals)
Costs Revenue streams

Staff time (bonuses for incentives) Administrative fees

Promotional cost Nominal workshop fee (cost sharing and commitment)
Venue rental
Transportation

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Suggestion from MF for loan product characteristics-
- All startup clients will have same loan interest rate of 15% on average (4 tiered according
to amount of loan starting 10%-)
1. Loan 6month for USD 500-1500
2. 18 months for USD 1500-3500
3. Two years for over USD 3500
4. 3 years max
- MF may want to extend repayment period for startups because it takes them time to
become cash flow positive (or give grace period with interest rate charged)

What the training program should include-

- Assistance with filling training application
- Selection of a small business sector, for those who don’t yet know
- Market study
- Proof of concept
- Projections: Financial planning and literacy including creating pro-forma income
statement (financial planning/forecasting), current bank accounts. While earlier
entrepreneurship training explains income statements and how they should be developed,
the startup financial planning training needs to focus on increasing capacities in planning
business.
- Going over the components of how to create specific sections of a business plan
- Go to lender to pitch idea to request loan
- Training on filling loan application
Note: How much is MF going to spend on the training program which will affect rate of
those loans to cover a percentage of the cost?

Input from loan applications (Interview with Loan Officer for Beirut Region)-
- LO Wafa looks at social background: family and motive: support family, education for
boys and married off girl.
- The team went over four actual loan applications so that they could identify trends

Loan #4598: Had land. With an espresso machine, took a loan to buy tables and chairs to
receive people, second loan bought juice maker, third loan was to make a tent for people to
sit under and then she made an oven to make breakfast. She is a very committed client and
pays on time. LO visits every month to check if there is continued interest. Lamia’s brother
was a guarantor.

- LOs are knowledgeable about business studies for common sector (coffee shops)

Loan #7132: learned driving at an advanced age to drop off her children at school, learned
English to assist her kids with school homework. She had a sandwich place that served day
workers. Took 2 loans one to buy an oven and the second to guy a grill. Very timely in
payments and didn’t want a long term loan to limit interest rate. She was very informed about
raw material cost and business planning. Husband was guarantor.

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 Loan #8770: born in 1996, Renee was putting a lot of potatoes in the sandwiches and was not
taking into consideration the cost benefit. After Wafa worked with her over a period visiting
her every week, her business started making profit. Quick learner and was taking input from
LO regarding extra products, design of shop etc. Father was guarantor.

- The loan application has been edited several times with the underwriter to reach this
version. For startups more info is needed: Project description and expertise.

Loan #7834: rejected. Wanted to open a saj shop for sandwiches, and had plans to employ a
man who has no experience, as the main borrower has another job. Although he had 2
guarantors the application was rejected. Elie was rejected because he was depending on
someone with no experience in bread making.

Additional Loans discussed included these innovative businesses-

- Recycling to make packaging material that is biodegradable and that sprouts purslane
when you dispose it.
- Figurine or doll maker. Facebook marketing. She has received her 3rd or 4th loan, and
sells at 200% of the production costs, but needs loan because of low cash flow and
seasonal demand for the dolls (summer for weddings, and the holidays interspersed
throughout the year).

What would you advise borrowers to prepare before applying for loan?
- Study business concept
- Hear objective advice and research market need

Loan application changes to fit startups-

- Proof of concept – expertise and market study for the project or business (project plan
attachment)
- That startups highlight other financial resources to support their lifestyle during the
launching phase
- Business differentiator/added value description
- Include project forecasting (pro-forma income statement)
- A page for strengths and weaknesses summary of issues spread out around the
application

Day 3
Scope of loan application-
The team considered the pros and cons of having a detailed template-type of a loan application
with having an open-ended loan application. After discussing, MF decided they believe the
detailed approach is the right approach for their clientele, as this ensures all questions are
answered.
- Detailed: needs time to fill and may intimidate potential borrower but requires less
follow-up time from MF

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 - Open ended: lets potential borrower express themselves, but needs follow-up by loan
officer
Another idea was that the business model canvas (BMC), as will be used during the trainings,
can serve as the open ended section that allows for free-form brainstorming. Then entrepreneurs
can reference the BMC to fill the business plan section of the application.

Format of application: restructure to fit startup loan-

Three main sections of the loan application were identified. Right now information is mixed up
throughout different pages, and MF decided to divide the information into three main sections.
- Personal information
- Business plan and information
1. Marketing: customer competition and markets study
2. Operations and labor
3. Financials
- Guarantor information

Edit Business Plan section for start-ups to include-

Type Cost Sell price

Unit cost for production

General Expenses
Salaries
Rent
Electricity
etc.
Startup/Asset Costs
Equipment
Furniture
Const.
Etc.

Monthly Cash Flow Statement

Month 1 Month 2 Month 3 Month 4 Month 5 Month 6…12
# of Customers 100 150 200
Revenue/customer 10 10 10
Cost/customer 8 8 8
Margin/cost 2 2 2
Profit 200 300 400

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 General expenses 300 300 300
Net Income -100 0 100
Status Sad Normal Happy

Loan product development-

- Size of loan: USD500-USD10,000

- Repayment period: grace period –Right now payments are mandated to begin within one
month of closing. Grace periods have been given for 45-60 days. Startups are usually not
net income positive until 3-4 or even 5 months. Suggestion to allow 3-month grace
periods on a case-by-case basis provided a good business case for doing so.
- Debt to equity ratio: equity from family and friends put in 70% and MF gives 30%. This
encourages business to succeed and not give up early. Recommendation not to finance
anything 100% debt financed. MF already does that (40-50% equity in amounts between
1000-7500USD); it is a decision factor in underwriting.

Components of the startup training program-

- Sector orientation evaluation to assist entrepreneurs plan their careers - what are the
problems you want to solve? What are the categories that attract you? This would be used
within the training. Article from which many small business ideas can be drawn.
https://www.entrepreneur.com/article/80684
Detail sector needs: How much dedication and skills each sector and scope needs
o SBA Entreprenuership readiness test
https://eweb1.sba.gov/cams/training/business_primer/assessment.htm
o Four types of business leadership https://www.americanexpress.com/us/small-
business/openforum/articles/a-personality-test-for-entrepreneurs/ and
http://www.hsgl.com/
- Fill out loan application exercise
Help in sessions to address each point in the business plan of the application
Coach individuals facing challenges in filling application (financials, adding value and
creativity)
- Education about lending responsibility: How big loan is, repayment time, payment
amounts.
- Business planning: Not asking too much or too little.
Current training plan of MF is comprehensive and 20 hours long. 2 hours per session.

Day 4
During Day 4, the team discussed a few final possible options for the lending product, including
the possibility of cash collateral:
1. Program fee that could be held as collateral in an escrow account, and returned upon
successful repayment of the loan.
2. The possibility of approving a larger loan, say $4000, but only disbursing $3000, and
keeping $1000 in escrow as cash-collateral. The client would then make payments as if

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 they had received a $4000 loan. At the end of the repayment, they would receive the
$1000. It could be marketed as a business loan and business savings product.

The team then continued the discussion with the MF loan officers on procedures that LEDC has
for its lending in Washington DC.

Credit Risk- Indicators of credit risk-

- Income and expenses of family
- Loan size
- Character
- Background of the founders
- Personnel plan
- Business plan analysis
- Understanding of key business numbers: costs of goods, overhead costs, expected
revenue
- Understanding of competition and market opportunities
- Number of partners in business
- Share of total business capital requested as loan
- How much they are going to have as salary
- Share of payments from income (MF pays 30% maximum and Eric recommends much
less for startups). Gross margin of business and how much of that is going to repay the
loan.

The FSVC volunteers then shared with the MF loan officers a brief on the startup loan program
that had been discussed over the previous three days.

Brief on startup loan program-

- Old companies know how many customers they have and what they can do
- New clients with new businesses are not aware of how much they will be making, how
and customers (proof of concept).
- Types of businesses that are high risk and low risk
o Innovative products that don’t yet exist -no
o Services with light assets - yes
o Existing product and new sales channel-yes
o Services that do not require assets – no
o Handicrafts-saturated and no
o Existing product marketed differently-no

Loan product parameters -

- Administrative fees remain same respective to loan amount
- Good business plan may need to increase minimum loan amount in order to address need
- Should be coupled with sophisticated training – Business model canvas, financial
planning, forecasting.
- New application – with MF now

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Marketing of the loan product -

Who to target and how?

- New clients to bring sponsor to outreach meeting – to have potential guarantors know
about the program
- University students – In-person information sessions (speaking engagements); need
scripts, PowerPoint, success stories, champions and material for speaking engagement.
- Current clients from other products (employee loan, from women loan and from student
loan who are about to graduate) who want to start new businesses
- Students of vocational training center of MF
- Previous clients
- Walk-in clients
- Victims of domestic abuse; before MF didn’t have a high risk loan but now they do so
they can address that need to help make them productive.
- Find loan clients who are marketing their products by searching online marketplaces
- People who make processed foods/cooperatives

Marketing material to create:

- Fliers
- Brochure that includes the announcement and awareness raising sentences
- Facebook targeted messaging as a first step and then get people talking about it – links to
webpage
- Webpage on MF website

What information needs to be on it?

- Flier: Name; eligibility; benefits; contact; date and place of meeting; cost; featured
speakers; encourage to bring sponsors
- Brochure: Same as flier plus success story; curriculum of program; time and duration;
registration information.
- Website: Same as brochure, plus an online RSVP feature

Eligibility criteria-
- Any age
- Any small Business sector
- Lebanese citizen
- Desire to launch a startup

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 Timeline for launch and piloting of the product-

Task M1 M2 M3 M4 M5 M6 M7 M8 M9 M10-12
Set a target execution date
Create program goals
Set client training curriculum
Finalize offerings of startup
loan product - Sawsan
Finalize client training
material
Creating monitoring
program: for training plan
and coaching program
Train loan officers - Sawsan
Finish updating startup loan
application - Vako
Adjustments to MIS to
collect different data than
they are used to
Pilot launch: setting first
sessions logistics
Getting people to sign up for
training – Loan Officers
Evaluate goals of program
and for clients
Coaches assist clients in
getting loan
Evaluate loan program
Learn and improve

Annex 1: Sample description of the program

This description could be used in brochures and the website.

[Multiple times a year], Makhzoumi Foundation runs [half-day] [Name of program, maybe
“Startup Boot Camp” etc] to help small business entrepreneurs launch their dreams.
Entrepreneurs are guided through a business model generation curriculum, surrounded by
experts, and mentored by community leaders. [Other benefits].

Main accomplishments participant will achieve during program:

• They have received coaching to help them select a startup sector
• Created a business plan and gained knowledge and guidance that allowed them to
accomplish that
• Achieved mastery to complete the loan application
• Understand the MF lending philosophy

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Annex 2: Business Plan Evaluation Chart

Based on discussions during the training, this chart will allow Loan Officers to analyze the risk
associated with a specific business plan

Key Question Low Risk Medium Risk High Risk

Number of founders 1 to 3 3 to 4 4 or more
Number of investors 1 to 3 3 to 4 4 or more
Does client understand and have a good estimation Yes Needs No
of input costs? improvement
Does client understand and have a good estimation Yes Needs No
of monthly overhead costs? improvement
Does client understand and have a good estimation Yes Needs No
of startup costs? improvement
Does client have a startup budget with realistic Yes Needs No
amounts? improvement
How much co-investment have they received Enter Amount
How much is their total budget for starting up? Enter Amount
What is the percentage of co-investment to loan 80% or more co- 31% to 79% 30% or less
amount? investment
Is there proof of the co-investment? (Check a bank Yes Would like to No
account statement, or has equipment already been see more proof
purchased or provided to the owner?)
Have they made any pre-sales? Yes Have a No
prototype, no
sales
Does the entrepreneur have experience in this area? 5+ years of 1+ years’ No substantial
progressively experience at experience in the
complex or least an entry sector.
managerial level role, or
experience in the university or
sector. vocational
training in the
sector.

Does entrepreneur understand the business's key They have They have They do not know.
differentiator, be it price, location, or quality? And proven, through identified a
have they demonstrated proof to the Loan Officer market research hopeful
that the business will be able to deliver on that and/or pre-sales differentiator, it
differentiator? and prototype is unclear they
development can deliver
that they can
differentiate
themselves.

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 Will the client offer sufficient collateral? Business assets Business assets Business assets or
or cash collateral or cash cash collateral
above 50% of collateral 20%- between less than
loan value 50% of loan 20% of loan value
value
Client's Character: Do they seem to be open minded Yes. Client is Client doesn't No, client seems
and willing to learn, and generally honest with their responsive to display defensive or to be
responses? questions and complete hiding
open to openness, but it information.
suggestions from may be a figure There are multiple
loan officer. of shyness or discrepancies
personality. throughout the
conversation.

Annex 3: Components of the startup training program-

- Part 1: Startup Sector Orientation The goal of this session is to help all new
entrepreneurs validate that they have the business idea they want. This will assist
entrepreneurs plan their careers – and decide the problems they want to solve. They will
explore the categories of startups that attract them. We suggest that members of the MF
lending team try out all of these resources and decide which ones are most appropriate for
their audience.
o Article from which many small business ideas can be drawn.
https://www.entrepreneur.com/article/80684
o SBA Entrepreneurship readiness test
https://eweb1.sba.gov/cams/training/business_primer/assessment.htm
o Test about four types of business leadership – this can give insight to the type of
leadership an entrepreneur would naturally gravitate to.
https://www.americanexpress.com/us/small-business/openforum/articles/a-
personality-test-for-entrepreneurs/ and http://www.hsgl.com/
o Basic career test: https://www.whatcareerisrightforme.com/career-aptitude-
test.php
- Part 2: Your business idea as of today
o MF shares a presentation explaining the importance of business plans. Perhaps
sharing 1-2 success stories of startup entrepreneurs who had very good plans
▪ Success stories taken from the loan applications shared with the team on
page “X” of this report
▪ Contrast with the type of entrepreneur who often fails.
▪ Describe that this training will help entrepreneurs be the kind who
succeed, but that in order to succeed, we need to take an honest look at
where we are today.
▪ Let them know about the loan application process and what to expect.
That NOW we are going to attempt the business plan portion of the loan
application.

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 o MF staff guide participants to share information that would complete the loan
application. This can be done in small groups or individually. Ensure that each
individual is made aware of parts of the business plan that they need to
strengthen. And to strengthen may require market research, finding suppliers,
talking to customers, creating a minimum viable product, finding work partners,
and more.
- Part 3: Working through parts of the business plan
Help in sessions to address each point in the business plan of the application
Coach individuals facing challenges in filling application (financials, adding value and
creativity)
o Session on the business model canvas here, and how this can be a tool to help
brainstorm the essence of their business. How they can then refer to the BMC to
help with specific questions in the loan application
- Part 4: Education about lending responsibility This section is where MF shares the
responsibilities of taking out a loan. Most clients want the biggest loan possible, but in
this session, MF will emphasize the importance of good budgeting to take out just what is
needed to succeed. Topics may include: Determining size of loan and, repayment terms,
monthly repayment amounts, an overview of how MF evaluates loan applications, and
how MF remains a partner throughout the life of a loan and beyond. It could be a good
idea to invite a current loan client to talk about their history with MF, as this could be
inspirational to participants.
o This is also a prime time to bring up the other parts of the loan application. So that
clients can be directed to find co-signers, think about how to strengthen other
parts of the application
o Also share other MF services outside of lending, as MF has a lot to offer. You
could even sign people up on the spot if they want to participate in other
programs.
- Part 5: Attempting the loan application again
o Participants should notice improvement after the training. Especially if the
participant had some time to do market research. The loan officer may partner
with the participant at this point if they need to further strengthen the business
plan. The loan officer who is assisting the entrepreneur will not be the loan
officer who will evaluate the loan application.

Timing of the training

- Current training plan of MF is comprehensive and 20 hours long. 2 hours per session.
- It could be best if this type of training were done in 1-2 sessions of 2-4 hours each. The
ultimate timing will depend on the content that MF decides to present
- Each “Part” does not necessarily represent a different day, as MF may decide how to
present the information.

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Annex 4: Sample business plan template that LEDC uses
Overview of Product/ Service Solution
• What your product or service does and for whom?
• If it is location-based, share the location and if you have secured a storefront yet
• General description of your products and services
• Why did you decide to open this business?
• Why is it a business opportunity?
• How will you deliver/manufacture or distribute your product/service?
Customer Problem
• Description of customer pain- What is the customer problem you are going to solve?
• How do you plan to solve it?
Key Players: Why you’re the right person/team to pull this off?
• Founders with % of ownership, other team members, key advisors and/or partners:
o their roles, industry background, expertise, and experience
o biographies or resumes can be created
• Why are you doing this?
Market Opportunity
• Target Market: Who are your main customers?
o Geography
o Demographics
o Income
o Interests
o Purchasing behaviors
• List main customers you already have been serving, along with any contracted amounts
• Market size
• Market growth
• Why your business will go faster than competition

Financials
• Be sure to prepare three years of projections and a business balance sheet as a part of
your Business Plan
• How much of your own money have you already invested into the project, and on what
did you spend it so far.

Competitive Landscape
• Industry Size
• Major Players: Current and future competitors
• Typical business model characteristics of business model of competitors
• Local Trends, Threats, and Characteristics:
o How strong is competition between companies in your industry?

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 • Summary of sustainable competitive advantages: Why is there a strong case that your
customers will access your offerings through you rather than your competitors?
o How easy is it for a new competitor to jump in and take over your business?
o How strong are your relationships with suppliers? How fixed are prices and do
you have an edge in any way?
o Do your customers have the power to bargain with you?
Go-To-Market Strategy
• How you will sell, deliver or distribute your product, service or solution?
• Key partners/distributors, if any
• How will customers learn about you and access your product/service?
• Key milestones and dates you hope to achieve those milestones?
• Have you made any pre-sales, or tested the product or service on anyone? If so, please
describe.
Product/Service development & Key Milestones
• Stages in product or service development
• Partner relationships as company grows
Critical Risks and Challenges
• What can go wrong and how you plan to manage it?
• Legal Considerations

Annex 5: Sheet that helps describe in detail the sections of the business model canvas

Business Model Canvas Sections Described

• Infrastructure
• Key Activities: The most important activities in executing a company's value
proposition. An example for Bic, the pen manufacturer, would be creating an
efficient supply chain to drive down costs.
• Key Resources: The resources that are necessary to create value for the customer.
They are considered an asset to a company, which are needed in order to sustain
and support the business. These resources could be human, financial, physical and
intellectual.
• Partner Network: In order to optimize operations and reduce risks of a business
model, organization usually cultivate buyer-supplier relationships so they can
focus on their core activity. Complementary business alliances also can be
considered through joint ventures, strategic alliances between competitors or non-
competitors.
• Offering
• Value Propositions: The collection of products and services a business offers to
meet the needs of its customers. According to Osterwalder, (2004), a company's
value proposition is what distinguishes itself from its competitors. The value
proposition provides value through various elements such as newness,

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 performance, customization, "getting the job done", design, brand/status, price,
cost reduction, risk reduction, accessibility, and convenience/usability.
• The value propositions may be:
• Quantitative – price and efficiency
• Qualitative – overall customer experience and outcome
• Customers
• Customer Segments: To build an effective business model, a company must
identify which customers it tries to serve. Various sets of customers can be
segmented based on the different needs and attributes to ensure appropriate
implementation of corporate strategy meets the characteristics of selected group
of clients. The different types of customer segments include:
• Mass Market: There is no specific segmentation for a company that
follows the Mass Market element as the organization displays a wide view
of potential clients. e.g. Car
• Niche Market: Customer segmentation based on specialized needs and
characteristics of its clients. e.g. Rolex
• Segmented: A company applies additional segmentation within existing
customer segment. In the segmented situation, the business may further
distinguish its clients based on gender, age, and/or income.
• Diversify: A business serves multiple customer segments with different
needs and characteristics.
• Multi-Sided Platform / Market: For a smooth day-to-day business
operation, some companies will serve mutually dependent customer
segment. A credit card company will provide services to credit card
holders while simultaneously assisting merchants who accept those credit
cards.
• Channels: A company can deliver its value proposition to its targeted customers
through different channels. Effective channels will distribute a company’s value
proposition in ways that are fast, efficient and cost effective. An organization can
reach its clients either through its own channels (store front), partner channels
(major distributors), or a combination of both.
• Customer Relationships: To ensure the survival and success of any businesses,
companies must identify the type of relationship they want to create with their
customer segments. Various forms of customer relationships include:
• Personal Assistance: Assistance in a form of employee-customer
interaction. Such assistance is performed either during sales, after sales,
and/or both.
• Dedicated Personal Assistance: The most intimate and hands on personal
assistance where a sales representative is assigned to handle all the needs
and questions of a special set of clients.
• Self Service: The type of relationship that translates from the indirect
interaction between the company and the clients. Here, an organization
provides the tools needed for the customers to serve themselves easily and
effectively.
• Automated Services: A system similar to self-service but more
personalized as it has the ability to identify individual customers and

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 his/her preferences. An example of this would be Amazon.com making
book suggestion based on the characteristics of the previous book
purchased.
• Communities: Creating a community allows for a direct interaction among
different clients and the company. The community platform produces a
scenario where knowledge can be shared and problems are solved between
different clients.
• Co-creation: A personal relationship is created through the customer's
direct input in the final outcome of the company's products/services.
• Finances
• Cost Structure: This describes the most important monetary consequences while
operating under different business models. A company's DOC.
• Classes of Business Structures:
• Cost-Driven – This business model focuses on minimizing all costs
and having no frills. e.g. Low cost airlines
• Value-Driven – Less concerned with cost, this business model
focuses on creating value for their products and services. e.g. Louis
Vuitton, Rolex
• Characteristics of Cost Structures:
• Fixed Costs – Costs are unchanged across different applications.
e.g. salary, rent
• Variable Costs – These costs vary depending on the amount of
production of goods or services. e.g. music festivals
• Economies of Scale – Costs go down as the amount of good are
ordered or produced.
• Economies of Scope – Costs go down due to incorporating other
businesses which have a direct relation to the original product.
• Revenue Streams: The way a company makes income from each customer
segment. Several ways to generate a revenue stream:
• Asset Sale – (the most common type) Selling ownership rights to a
physical good. e.g. retail corporations
• Usage Fee – Money generated from the use of a particular service e.g.
UPS
• Subscription Fees – Revenue generated by selling a continuous service.
e.g. Netflix
• Lending/Leasing/Renting – Giving exclusive right to an asset for a
particular period of time. e.g. Leasing a Car
• Licensing – Revenue generated from charging for the use of a protected
intellectual property.
• Brokerage Fees – Revenue generated from an intermediate service
between 2 parties. e.g. Broker selling a house for commission
• Advertising – Revenue generated from charging fees for product
advertising.
• Resources the main inputs that your company uses to create its value proposition, service
its customer segment and deliver the product to the customer.
Source: Wikipedia

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