EntrpereneurshipEntrpereneurshipFunding and Financing Funding and Financing

Funding and FinancingFunding and Financing

• As long as you’re going to be thinking anyway, think big.

• Donald Trump

Funding and FinancingFunding and Financing

• Any viable business startup needs to be financed (to pay salaries, rent, product development, etc.).

• There are different options for financing.• The government provides different

resources for entrepreneurs who are starting their business (to encourage entrepreneurship).

How and Where to StartHow and Where to Start

• Get informed about the different funding resources

• The government usually offers different venues of financial assistance to start-ups

• There are organizations in your university and other non governmental organizations that would help to provide funding or information about it.

Decide the Type of Financing Decide the Type of Financing

Self-financing

Grants

Bank loan

Investors

Self-Financing Self-Financing

• Self-financing means that you provide the funds needed to start your business

• According to Entrepreneur magazine, it is the number one source of start-up financing for small businesses

• You can save up money, use preexisting savings, take out a home equity loan, etc.

GrantsGrants

• Usually there are opportunities to get grant to fund your new business

• The source of grants are the government and non governmental organizations.

• Some grants are awarded to the best business plan or business team (merit-based)

• You do not need to pay back the grant !

Bank LoanBank Loan

• Bank loans are a good option for financing a new business

• Bank loans are based on your credit, a solid business plan, experience, assets, and sometimes a personal guarantee that the loan will be paid back.

• If you are taking the bank loan route, be sure to contact different banks, and get the best terms and/or interest rate.

Investors Investors

• Financing from friends or family members- who have extra money and want to help

• Financing from a person who invest in the business usually to gain stock or equity

• Private equity investors are usually made by individuals or privately owned companies

• Venture capital investors are also from private equity but they tend to be more hands-on, they bring managerial or technical knowledge to help grow the business

Important TermsImportant Terms

Financing to help with the cost of starting a business prior to when goods or services can be sold is called?

a) Pre-financing

b) Post financing

c) Start-up financing

d) None of the above

Important TermsImportant Terms

What is an internal source of finance?

a) Profit

b) Interest

c) Loans

d) None of the above

Important TermsImportant Terms

What is "Trade Credit?"

a) Services or product traded for other services or product.

b) Money owed to another business for services or product.

c) A credit card used to pay for services or product.

d) None of the above

Shop Around !Shop Around !

Explore your options

Shopping around is not costly

Once you start getting FinanceOnce you start getting Finance

Procure a place of business

Materials and supplies

Maintain a budget

Example: The case of MajdExample: The case of Majd

Majd wants to start his own business

He has come up with a business plan

He makes a list of all of the equipment he needs

He gets additional funds from the potential employees

In the case of Majd, his employees invest in the company. What kind of investors are they?

a) Angel Investorsb) Venture Capital Investorsc) Self-financingd) None of the above

Which of the following is NOT one of the three main types of investors?

e) Private Equityf) Venture Capitalg) Angelh) Self-Financing

Example: The case of MajdExample: The case of Majd

In the case of Majd, his employees invest in the company. What kind of investors are they?

a) Angel Investorsb) Venture Capital Investorsc) Self-financingd) None of the above

•Angel investing is a person, or persons, who invests in businesses that do not get the attention of venture capitalists. These investors usually gain stock or equity in the company.

Which of the following is NOT one of the three main types of investors?

a) Private Equityb) Venture Capitalc) Angeld) Self-Financing

•The three most common types of investors are Private Equity, Venture Capital, and Angel investing.

Example: The case of MajdExample: The case of Majd

Group Activity (Financial Plan: Basic Terms)

Group Activity (Financial Plan: Basic Terms)

• Refer to the document of (Harvard Business School Press) titled (Writing a Business Plan: The Basics).

• In teams of two students, discuss the section of Financial Plan (pages 25 to 35).

• Continue on next slide

• Provide a short definition of the following terms: – Assets– Liabilities – Owner’s Equity – The Balance Sheet – The Income Statement – Depreciation

– The Cash Flow Statement • The lecturer will pass among the teams and respond to

your questions• Each team should write the answers on a separate sheet

and provide it at the beginning of next class (assignment)

Group Activity (Financial Plan: Basic Terms)

Group Activity (Financial Plan: Basic Terms)