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Published byBridget Cooper Modified over 9 years ago
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BCEN 2900 Entrepreneurship
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Where are you going to get it? Choose the right source and know the pros and cons Know the right people to get money Plan money into your timeframe Be creative where it counts Know what you’re getting into
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Capital – what is it? Why do we need it? Bootstrapping versus funded ventures Three types of capital Fixed – building, land, equipment Working – current assets minus current liabilities Growth – excess stores of capital to fund expansion Why do we need to know these?
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Equity – The personal investment of an owner in a business Can all be lost Entrepreneur gives control to other owners Debt Financing that is borrowed and must be repaid Includes an interest component No dilution of ownership and control
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Personal savings Entrepreneurs should expect to contribute 20-50% of their start-up funds Friends and family Angel investors Angel investors Partners Venture capital companies Initial public offering
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Dana White, UFCUFC Bought old UFC as a tattered brand for $2 million with help from a childhood friend. Poured money and hype into the brand to make it a brand that grosses $200 million today, 7 years later. Has gone from 3000 tickets sold to 21,000 per event. Has fueled a nationwide affinity for MMA
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Again, you do have to repay loans, with interest. Loans can come from: Banks, suppliers, finance companies, brokerages, insurers, credit unions, credit cards, bonds, and other lending companies Bankscredit cards, Banks: May turn you down because you have no collateral, no cash flow plan, or you haven’t provided them with convincing information
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A tricky proposition – relationships can be damaged! Know how the loan or investment is impacting everyone – don’t strap anyone! Get it in writing Have a realistic repayment or cash-out plan.
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Lisa D’Aquanni, owner of The Chocolate Gecko, has been able to slowly grow her home-based business by raising funds in creative ways like selling gift certificates and bartering. She now needs to purchase and renovate a building.The Chocolate Gecko John Acosta, owner of Jolly Technologies, faces the same challenge, as he attempts to raise $100,000 to modify the production and enhance marketing efforts for his garage-door opening device. What are the advantages and disadvantages of equity and debt for both of these folks? Would the following funding sources be appropriate for both – friends and family, angels, IPO, bank loan? What do they need to do before approaching a funding source?
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EDA and HUD loans Up to $10 million (EDA); $5 million (HUD) For EDA loan, owner must supply 15% of loan amount in capital Community development block grants USDA Rural Business-Cooperative Service Tries to improve economies of rural areas Great for Internet based companies without need for city ties
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SBIR Small Business Innovation Research Cash grants! 12% of applicants funded $100,000 to $750,000 STTR Grants up to $500,000 for university/nonprofit institutions who partner with private organizations
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Largest financial backer of small businesses in the U.S. Up to $750,000 loans Low Doc Loans for up to $150,000 7(a) loan For startups 10 to 25 year loans for working capital, equipment, and buildings
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504 loans Group of loans, plus 10% equity from owner For expansion through purchase of equipment and buildings Through certified development centers (CDCs) Microloans Up to $35,000 for startup for small businesses and nonprofit childcare centers Through intermediary centers
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