Accessing Capital Gener8! Business Ready in 8 Weeks
Before Seeking Capital
Note: Existing Businesses will most likely need to show they are profitable or have collateral to secure loans
Accessing Capital 2
• One-time charges• Recurring costs• Hidden costs & contingencies
Determine your start up costs
• What’s your “Skin in the Game”
Determine your personal equity
• Ensure you have included all items and contingencies
Estimate monthly expenses
What is the Anticipated Revenue?
• Determine what you expect your annual sales to be in year one by:– How much traffic do you anticipate monthly?– How much will be spent on average by each
customer?– What will it cost for you to serve that
customer?– Cost of goods sold (inventory, shipping,
marketing, etc.)
3Accessing Capital
Various Sources For Accessing Financing
– Personal savings/Individual assets– Current Sales and/or income– Bank/Credit Union small biz loans and SBA loan
guarantees – Micro lenders– Existing credit lines – Refinancing debt– Retirement accounts– Investor(s) and/or partners– Family and friends– Grants– Vendor Financing – Credit cards (not recommended)
4Accessing Capital
Debt Financing
• Is borrowed money which the entrepreneur must pay back to the lending institution
• Typically for well-established businesses• Requires good credit history (borrower)• Obtained through credit unions and/or
banks
5Accessing Capital
Advantages & Disadvantages of Debt Financing
6Accessing Capital
Advantages
• Owner maintains control
• No obligation to lender aside from repayment
• Interest is tax deductible
• Repayment terms are fixed
Disadvantages
• Requires regular monthly payments w/ accruing interest
• Can tarnish credit and limit raising additional capital
• Mostly limited to businesses with solid track records
Equity Financing
7Accessing Capital
• Is borrowed money given in exchange for ownership in business
• Used primarily by startups, new businesses and those with poor credit ratings
• Obtained using:– Personal funds (savings, retirement, etc.)– Friends/Family– Investors/Venture capitalists/banking firms– Large corporations
Advantages & Disadvantages Of Equity Financing
8Accessing Capital
Advantages
• Owner obtains funds without incurring debt (more cash flow)
• Owners focus on making products profitable
• Can develop long term relationships
• Ability to invest more than towards debt
• Friends and family can be a quick way to capital
Disadvantages
• Dilution of ownership• Investors may feel
inclined to have a say• Strain may occur with
family and friends• Personal finances may be
maxed• Reporting is often
required by investors
Know Your Personal Credit
• Your personal credit will impact your ability to secure loans
• Review your most recent credit profile– www.annualcreditreport.com
9Accessing Capital
Securing Loans Through a Credit Union/Bank
• Most require you to produce at least 10% in cash needed for start-up
• Commonly referred to as your “owner equity/investment” or “your skin in the game”– Do you have this money?– Some but not all?– No money to invest?
10Accessing Capital
Other Considerations For Financing
11Accessing Capital
• Ability to repay loan• Ensure a diverse revenue sources
and/or customer base• Insurance to protect your business• Incorporating for protection and
tax purposes • Trigger points and other safeguards • Contingencies
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