Simple Steps for Starting Your Business · 2020-05-19 · Simple Steps for Starting Your Business Sources of Capital Module 5: Funding Sources • SBA microloans –Generally not

Simple Steps for Starting Your Business

Module 5: Funding Sources

Simple Steps for

Starting Your Business



Module 5: Funding SourcesSimple Steps Modules

One-on-One Mentoring

Session 1:

Startup

Basics

Session 2:

Business

Concept

Session 3:

Marketing

Plan

Session 4:

Financial

Projections

Mentoring/Build

Business Plan “Go or No-go” decision &

next steps with mentor

Session 5:

Funding

Sources



• How did you do?

• Any questions on your draft financial

projections worksheets.

• Any issues obtaining your Risk Management Association (RMA) ratio data?

• Any questions?

Homework



• Financial statement analysis

• Accounting and bookkeeping systems

• Sources of capital (traditional and non-

traditional)

• The “six C’s of credit”

• Banking relations

• Go/No-Go decision

• Next steps

Agenda



• Monthly preparation and review of

financial statements (within 10 days

after the close of the month)

• Ratio analysis

• Current ratio, accounts receivable

and payable analysis

• Comparative benchmark analysis

Financial Statement Analysis



• Choosing-manual vs. computerized

– www.techradar.com/news/software/applications/

best-free-accounting-software-8-programs-we-

recommend-1136684

www.businessnewsdaily.com/7545-best-free-

accounting-software.html

www.businessnewsdaily.com/7543-best-

accounting-software.html

• Hiring a bookkeeper vs. DIY

• Train and educate yourself in accounting and

understanding financial statements

– https://www.sba.gov/course/introduction-accounting/

• Working with your accountant

Accounting & Record Keeping

http://www.techradar.com/news/software/applications/best-free-accounting-software-8-programs-we-recommend-1136684

http://www.businessnewsdaily.com/7545-best-free-accounting-software.html

http://www.businessnewsdaily.com/7543-best-accounting-software.html

https://www.sba.gov/course/introduction-accounting/



• Preparation is essential

• Lenders want facts, research and accurate

projections

• Whether you seek funding now or in the

future, your records should be in order

Record Keeping and Financing


Module 5: Funding SourcesClient Resource Guide

The SCORE St. Paul Client Resource Guide has a number of funding related tools and resources:

SCORE St. Paul Client Resource Guide

https://s3.amazonaws.com/mentoring.redesign/s3fs-public/SCORE%20St.%20Paul%20Client%20Resource%20Guide%20vers.%201.3%20Final.pdf



• Bank or credit union

financing

• Credit cards

• Partners

• Sale of capital stock

• Government Grants

• Owner’s equity

investment

• Savings, investments,

insurance cash

surrender value

• Friends & family

• Home equity loan

Sources of Capital: Traditional



• SBA guaranteed loans through banks, CDCs

• Microloans

• Mn- Dept. of Community & Economic Dev.

• Wisconsin Economic Dev. Corp- inwisconsin.com

• Regional Business Fund rbfinc.org/programs.html

• USDA Rural Development: Guaranteed Business & Industry; REDLG;

Microloans; Revolving loan Funds

• Crowdfunding

• Angel Investors

• Venture Capital

• Factoring

Sources of Capital:

Special and Non-traditional

http://www.inwisconsin.com/

http://rbfinc.org/programs.html



• SBA guaranteed loans: www.sba.gov

– https://www.sba.gov/business-guide/plan-your-

business/fund-your-business

– SBA 7(a) up to $5 million; Interest rate – Prime + up to

2.75%

– SBA Express up to $350,000 ; Prime plus Up to 6.5%

depending on loan size

– Community Advantage- Prime+up to 6%

– Find a Lender-Your local bank/credit union or use SBA

Lender match at : www.sba.gov/funding-

programs/loans/lender-match

• SBA Fixed Asset Financing program- 504

– Provides financing of land, building and equipment for 10 to 25 years at a

fixed rate for 30-40% of the project needs in partnerhsip with a loan from

from your normal lender

– 504 lenders: 504 Corp; Minnesota Business Finance Corporation; Spedco;

TCM Certified Development Co.; WBD

Sources of Capital: Special and

Non-traditional l

http://www.sba.gov/

https://www.sba.gov/business-guide/plan-your-business/fund-your-business

http://www.sba.gov/funding-programs/loans/lender-match

http://www.504corporation.com/

http://www.mbfc.org/

http://www.spedco.com/

http://www.504lending.com/

http://www.wbd.org/


Module 5: Funding SourcesSources of Capital

• SBA microloans

– Generally not to exceed $50,000 & not able to get bank financing

• Lenders

– African Development Center

• www.adcminnesota.org

• 612-333-4772

– Hmong American Partnership

• www.hmong.org

• 651-495-1557

– Neighborhood Development Center

• www.ndc-mn.org

• 651-291-2480

– WomenVenture

• www.Womenventure.org

• 612-224-9540

12

http://www.adcminnesota.org/

http://www.hmong.org/

http://www.ndc-mn.org/

http://www.womenventure.org/


Module 5: Funding SourcesSources of Capital

• Minnesota DEED financing programs

http://mn.gov/deed/business/financing-business/deed-programs/

• Wisconsin- Inwisconsinhttp://inwisconsin.com/entrepreneurs/assistance/capital-catalyst

• Regional Business Fund for Wisconsin businesses – www.rbfinc.org

– Revolving Loan Fund

– Microloan Fund

– Growth Loan Fund

– Façade Loan Fund

– Technology Enterprise Fund

– EDA Revolving LoanFund

• Federal Government Grants: www.grants.gov

13

http://mn.gov/deed/business/financing-business/deed-programs/

http://inwisconsin.com/entrepreneurs/assistance/capital-catalyst

http://www.rbfinc.org/

http://www.grants.gov/


Module 5: Funding SourcesCrowdfunding

• What is Crowdfunding?

• CROWDFUND Act and JOBS Act

• Traditional Financing vs. Crowdfunding

Sources:

nlcfa.org

startupexemption.com

opportunity.org


Module 5: Funding SourcesTypes of Crowdfunding

Microfinance Credit-based Rewards-Based

Crowdfunding

Equity

Crowdfunding

Types of

Projects

Financial

services for

people with

limited access to

bank services

Nearly any

purpose from

business

investment to

paying down

debt

Often creative in

nature.

Could also be

business of

philanthropy, i.e.

funds raised to

support a cause.

Investment

Rewards None Financial

(interest)

Something related to

the project or cause

Financial

(appreciation or

interest)

Sources:

nlcfa.org

startupexemption.com

opportunity.org

sba.gov

crowdraiser.com

businessnewsdaily.com


Module 5: Funding SourcesCrowdfunding Platforms

Microfinance Credit-based Rewards-Based

Crowdfunding

Equity Crowdfunding

Kiva.org

Accionusa.org

Prosper.com

SoMoLend.com

Lendingclub.com

Kickstarter.com

Indiegogo.com

Fundable.com

Wefunder.com

Relayfund.com


Module 5: Funding SourcesAngels, Venture Capital

and Factoring

• Angel Investors is an affluent individual who provides capital

for a business start-up, usually in exchange for convertible

debt or ownership equity. A small but increasing number of angel

investors invest online through equity crowdfunding or organize

themselves into angel groups or angel networks to

share investment capital, as well as to provide advice to their

portfolio companies

• Venture Capital- is a type of private equity,[1] a form

of financing that is provided by firms or funds to small, early-stage,

emerging firms that are deemed to have high growth potential, or

which have demonstrated high growth

• Factoring-discounted purchase of your receivables

https://en.wikipedia.org/wiki/Startup_company

https://en.wikipedia.org/wiki/Convertible_debt

https://en.wikipedia.org/wiki/Ownership_equity

https://en.wikipedia.org/wiki/Equity_crowdfunding

https://en.wikipedia.org/wiki/Investment_capital

https://en.wikipedia.org/wiki/Private_equity

https://en.wikipedia.org/wiki/Venture_capital#cite_note-PrivCo-1

https://en.wikipedia.org/wiki/Financing

https://en.wikipedia.org/wiki/Start-up_company



Lenders and banks look for:

• Good credit

• Management expertise and

commitment

• Feasible business plan

• Adequate owner equity

• Sufficient collateral

The Loan Application



• Character

• Capacity

• Collateral

• Capital

• Conditions

• Cash Flow

6 C’s of Credit



• Trustworthiness

• Personal and business credit history

• Integrity

• Quality of references

• Experience in the business

• Impression you make on the lender or

investor

Character



• Is your company able to repay the

amount borrowed?

• How soon can you generate positive

cash flow?

• When will you show a profit?

• How large will the profit be?

• Can the profit be sustained?

Capacity



• The money you have personally

invested

• Your ability to save money and

accumulate growth in owner’s equity

Capital



Additional Forms of Security:

• Secondary source of repayment

• Third party guarantee

• Tangible assets

• Property

• Equipment

• Accounts receivable

• Inventory

Collateral



• Terms of loan:

– Intended purpose of loan

– How much is requested

– Length of loan

• Local economic climate of industry

• Local economic climate of business

Conditions



• Where is the money coming from to

repay the debt obligation?

• Where will all the money go?

• How much of a “cushion” should I

keep?

Cash Flow



• A FICO score of 700 or greater is

desirable

• Your personal credit report available

for free from:

www.annualcreditreport.com

Credit Reports

http://www.annualcreditreport.com/



• Collateral (both business

and personal)

• Personal tax returns (3 yrs)

• Personal financial

statements

• Resumé

What You Need:

• Cover letter introduction

• Summary of financial needs

• Financial statements (3 yrs)

• Business tax returns (3 yrs)

• Projected cash flow statement

(12 months)

Your credit score will drop by about 5 points with each application – find out if the

bank will do business with you before you apply. One application may be enough!

Bank Loan Application



Additional Questions:

• Any legal claims, liens or judgments?

• Are any assets pledged?

• Tax returns and payment

up-to-date?

• Life insurance (face value, cash value)?

• Monthly household income?

• Monthly household expenses?

Bank Loan Application



• Leases

• Inventory

• Equipment

• Chattel Mortgages

• Accounts Receivable

• Plant Improvement Loans

• Conditional Sales Contract

Financing from Balance Sheet



Getting Your Foot in the Door

• Know your financial SWOT

– Strengths

– Weaknesses

– Opportunities

– Threats

• Use your “strengths” for your:

– elevator speech

– abbreviated presentation

Face-to-Face Meeting



• Financial statement analysis

• Accounting and bookkeeping systems

• The “six C’s of credit”

• Banking relations

• Sources of capital (traditional and

non-traditional)

• Go/No-Go decision

• Next steps

Review



Total score should not be more than 10. Assign more points to indicate agreement, less if you do not agree.

Topic Question Points

Idea Feasibility

My product/service is servicing an unmet need.

My product/service could be expanded to gain additional customer groups.

Market Identification I know who my potential buyers are.

I have a clear value proposition for my potential buyers.

Implementation I know what it will take to start my business.

I know what it will take to run my business.

Funding I understand what it will take to obtain funding.

I have a plan to fund my business start.

Personal Readiness I am ready to work hard to achieve my business goals.

I understand the challenges ahead and have a plan to tackle them.

Total Points:

Readiness Self-Assessment



Congratulations! You’ve completed the

Simple Steps for Starting Your Business Series!

Simple Steps Series

One-on-One Mentoring

Session 1:

Startup

Basics

Session 2:

Business

Concept

Session 3:

Marketing

Plan

Session 4:

Financial

Projections

Mentoring/Build

Business Plan

“Go or No-go” decision & next

steps with mentor

Session 5:

Funding

Sources


Module 5: Funding SourcesModules & Core Resources

Module 1 – Startup Basics:

https://stpaul.score.org/event/simple-steps-starting-

your-business-module-1-startup-basics

Module 2 – Defining Your Business Concept:


your-business-module-2-defining-your-business-concept

Module 3 – Developing Your Marketing Plan:


your-business-module-3-creating-your-marketing-plan

Module 4 – Financial Projections


your-business-module-4-financial-projections

Module 5 – Funding Resources:


your-business-module-5-funding-sources

Simple Steps Course Materials:

https://www.score.org/simple-steps-starting-your-

business-course-materials

Simple Steps Workbook:

https://s3.amazonaws.com/mentoring.redesign/s3fs-

public/SCORE-Canon-Simple-Steps-Starting-Business-

2014_1.pdf


Module 5: Funding SourcesSession 5 Resources

Page 35



Set up a meeting with your SCORE mentor,

we can help you with:

– Further research on your idea

– Completing your feasibility plan

– Finalizing your financial forecast

– Assist in development of your business plan

– Preparing your loan package

– Launching your business

– Growing your business

Help us to help others by completing an

evaluation.

Contact

SCORE

Next Steps



Thank you

We wish you success

and look forward to

continuing our work

together!

Documents

Simple Steps for Starting Your Business · 2020-05-19 · Simple Steps for Starting Your Business Sources of Capital Module 5: Funding Sources • SBA microloans –Generally not