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How to Finance YourBusiness Start-Up
Aizhan Tursunbayeva
24.09.2011
How to Finance Your Business Start-Up
Access to Credit
Objective:
Understanding how to obtain financial
support for your business during start-up and going forward.
Criteria for Success Business Plan including financial information: Balance
Sheets, P&L Statements, Cash Flows, Budget and Time Line.
Realistic Sales and Revenue Expectations
Know your Opportunities and Risks
Listen to Objections
Learn from Criticism
Understand your Finance Source and its Expectations.
Provide an Exit Strategy
What Constitutes an Effective Business Plan
Mission StatementTwo or three statements that state your mission, vision and values.
Key Business ActivitiesDetermine what your company sells/services.What is your market?
Products and ServiceHow does your product add value?
What Constitutes an EffectiveBusiness Plan
Sales and MarketingSales projections, customer pricing, forecasts and opportunities and risks
Operating PlanFacilities, resources and processes used to run your business
Human ResourcesStructure and people to operate your business.Retention of key employees
What Constitutes an EffectiveBusiness Plan
Financial Plan
Credible projections, stating your financial
needs, balance sheet, P&L statements and cash flow budget.
Future Growth
How will your company grow in 3 to 5 years?
How do you position your company?
What Constitutes an EffectiveBusiness Plan Exit Strategy-Four Ways to Go
IPO
Sale to a Competitor or Partner
Sale to Employees
Family Inheritance
Close
A properly planned exit will determine how you finance your start-up
A properly planned exit can be a lucrative way to realize the value you have created
Starting a Business
Assessment
Develop ideas / business potential
Your Business Plan
How do you plan to finance and market your
business?
Starting a Business
Financing
How to finance your business
First Year
Managing your day-to-day operations and
planning growth
Obstacles to Financing aStart-Up
No track record
Difficult to sell concept
Lack of assets
No record of successful management
Market acceptance
Sources of Finance
Family, friends Personal credit cards Banks Venture capital funds Finance companies Development Banks Governmental programs
Sources of Finance
Every source has its own expectations but all want to profit from their investment
The greater the risk the greater the expectation of high returns
Develop your “Value Proposition”
Sources of Finance:Banks
WHAT DO BANKS LOOK FOR?
Professional Profile
Evaluate your ability to manage the project.
A clear business plan.
Project Viability
Structured and short comments that cover
all the elements of your business
Sources of Finance:Banks
TIPS: Prove or qualify every conclusion you make
Stick to your project – one clear and complete idea to many vague possibilities
Help your banker to understand – Avoid
technical details or language unless necessary
Sources of Finance:Banks
Show how you will succeed
Ability to repay your obligations
Your forecast should prove how the project will be profitable.
Keep it to a business proposition
Concentrate on viability
Sources of Finance:Venture Capital
Want high returns, equity, an exit strategy, a position on your board and will judge your proposal by the companies management experience
Will provide funding on a success basis only and will withdraw funds if the company does not meet its projections
Business Plan and complete financial projections
Sources of Finance:Finance Companies
Specialized lenders – Products include leasing, subordinated debt, personal
quarantines, etc.
Sources of Finance:
Loans and Grants
Loans or leases
Complements other lenders
Finance start-ups
How to Deal with Your Lenders
Keep them apprised of your business
Provide periodic financial information
Let them know the good and bad news. It is best that any bad news comes from you and you can explain how you plan to overcome the problem
Types of Credit Loans
Requires collateral
Credit – Short and Long Term
LeasingAsset based lending, the asset is the collateral, the terms fit the equipment and normally does not require prior credit history
Credit LinesUse of personal credit facility. Expensive andnormally is not sufficient
Questions