Presentation on theme: "FINANCE, PROTECT, AND INSURE YOUR BUSINESS"— Presentation transcript:
1 FINANCE, PROTECT, AND INSURE YOUR BUSINESS Entrepreneurship4/21/2017Chapter 7FINANCE, PROTECT, AND INSURE YOUR BUSINESS7.1 Put Together a Financial Plan7.2 Obtain Financing for Your Business7.3 Protect Your Business7.4 Insure Your BusinessChapter 7
2 Lesson 7.1 PUT TOGETHER A FINANCIAL PLAN Chapter 7Lesson 7.1 PUT TOGETHER A FINANCIAL PLANGOALSCalculate your start-up costs.Create a cash flow statement, an income statement, a balance sheet, and a personal financial statement.
4 Chapter 7START-UP COSTSStart-up costs are the one-time-only expenses that are paid to establish a business.Common start-up costs include:Equipment and suppliesFurniture and fixturesVehiclesRemodelingLegal and accounting feesLicensing fees
5 Chapter 7CASH FLOW STATEMENT*A cash flow statement describes how much cash comes in and goes out of a business over a period of time.Forecast revenuesForecast operating expensesPrepare the cash flow statementBest and worst case
6 Chapter 7CASH FLOW STATEMENT*Many entrepreneurs create two types of cash flow statements based on a worst-case scenario and a best-case scenario.Worse-case scenario, you should project lower revenues and higher expenses than you think you will have.Best-case scenario, you should project the highest revenues and the lowest expenses your business is likely to have.Best-case and worst-case scenarios show you and lenders how much cash you will generate in any situation.
7 Chapter 7INCOME STATEMENT*An income statement is a financial statement that indicates how much money a business earns or loses during a particular period.Also known as a profit and loss statementDifference from a cash flow statement
8 INCOME STATEMENT vs Cash Flow Statement* Chapter 7INCOME STATEMENT vs Cash Flow Statement*An income statement might show revenues you have not received and expenses you have not yet paidA cash flow statement only records money that actually has been received or paid.
9 Chapter 7INCOME STATEMENT*Most businesses prepare income statements on an annual basis to determine the amount of profit on which taxes are paid.Entrepreneurs need to view an income statement each month to monitor expenses and revenue more frequently.
10 Chapter 7BALANCE SHEET*A balance sheet shows the assets, liabilities, and capital of a business at a particular point in time.Common adjustments are:Uncollectible accounts and depreciation
11 Chapter 7BALANCE SHEETTypes of assets – items of value owned by a business. Items might include cash, equipment and inventory.Types of liabilities – items that a business owes to other. Items might include loans and outstanding invoices.Uncollectible accounts – amount a company will not receive from customers. No payment for the merchandise purchased.Depreciation – lowering of the value of an asset to reflect its current value
12 PERSONAL FINANCIAL STATEMENT* Chapter 7PERSONAL FINANCIAL STATEMENT*A personal financial statement is a balance sheet of your holdings.It shows your personal assets, liabilities, and net worth.A bank requires a lot of financial information when considering lending money because it minimizes the risk of borrowers defaulting on loans.
13 ALL DUE AT THE END OF CLASS. Answer in complete sentences!!!!!!!!!!! Chapter 7Chapter 7.1 AssignmentPutting together a Financial PlanCheckpoint pg 159Checkpoint pg 160Checkpoint pg 162Checkpoint pg 163Think Critically pg 163 # 1 & 2 onlyALL DUE AT THE END OF CLASS. Answer in complete sentences!!!!!!!!!!!
14 Lesson 7.2 OBTAIN FINANCING FOR YOUR BUSINESS Chapter 7Lesson 7.2 OBTAIN FINANCING FOR YOUR BUSINESSGOALSConsider different types of bank loans.Explain Small Business Administration loans.Evaluate other sources that can provide debt capital.
15 Bank Loans Debt Capital Collateral Chapter 7Bank LoansDebt CapitalMoney loaned to a business with the understanding that the money will be repaid with interest. In a certain time period.CollateralProperty that the borrower forfeits if he or she defaults on the loan.Banks demand collateral so that they have some recourse if you fail to repay your loan.
16 BANK LOANS* Types of bank loans Types of secured loans Chapter 7BANK LOANS*Types of bank loansSecured loans – loans backed by collateral.Unsecured loans – loans that are not guaranteed with property.A secured loan is easier to obtain than an unsecured loan because the risk to the lender is much less. *Types of secured loansLine of credit – agreement by a bank to lend up to a certain amount of money whenever the borrower needs it. A fee is charged.Short-term loan – a loan made for a very specific purpose that is repaid within a year.Long-term loan – a loan payable over a period longer than a year.
17 REASONS A BANK MAY NOT LEND MONEY* Chapter 7REASONS A BANK MAY NOT LEND MONEY*The business is a start upLack of a solid business planLack of adequate experienceLack of confidence in the borrowerInadequate investment in the business
18 SMALL BUSINESS ADMINISTRATION LOANS* Chapter 7SMALL BUSINESS ADMINISTRATION LOANS*SBA loan assistanceRequirements of SBA loansApply for an SBA loanTwo types of loans given by the SBAA cash loan is a full loan repayable to the SBAA loan guarantees is a promise to the bank to pay a percentage of the loan if the borrower defaults.SBA assistance is in the form of loan guarantees because the lack of government funding for direct loans. *
19 REQUIREMENTS OF SBA LOANS* Chapter 7REQUIREMENTS OF SBA LOANS*Your business must be considered a small business.Your business must not be the leader in its field.Your business must comply with all federal employment laws.Your business cannot create or distribute ideas or opinions.You must have been unable to obtain financing from a commercial bank.You must invest a reasonable amount of your own money in the venture.You must provide adequate collateral.
20 OTHER SOURCES OF LOANS Small Business Investment Companies—SBIC Chapter 7OTHER SOURCES OF LOANSSmall Business Investment Companies—SBICMinority Enterprise Small Business Investment Companies—MESBICDepartment Of Housing And Urban Development—HUDEconomic Development Administration—EDAState governmentsLocal and municipal governments
21 Department of Housing and Urban Development (HUD) Chapter 7Department of Housing and Urban Development (HUD)Criteria the department of housing and urban development (HUD) uses to grant loans to cities might include: *High unemployment ratesLow average incomesFew businesses
22 FINANCE YOUR BUSINESS WITH EQUITY CAPITAL* Chapter 7FINANCE YOUR BUSINESS WITH EQUITY CAPITAL*Equity capital is money invested in a business in return for a share in the business’s profits.Sources of equity capitalPersonal financingFriends and familyVenture capitalist
23 DUE AT THE END OF CLASS. ANSWER IN COMPLETE SENTENCES!!!!! Chapter 7Chapter 7.2 AssignmentObtain financing for your businessCheckpoint pg 166Checkpoint pg 167Checkpoint pg 168Checkpoint pg 170Thinking Critically pg 170 # 1 – 3DUE AT THE END OF CLASS. ANSWER IN COMPLETE SENTENCES!!!!!
24 Lesson 7.3 PROTECT YOUR BUSINESS Chapter 7Lesson 7.3 PROTECT YOUR BUSINESSGOALSCategorize business risk.Identify security precautions to protect your business from different types of theft.
25 Chapter 7BUSINESS RISK*Human risks* – caused by the actions of employees and customers. examples include accidents, theft, and robberyNatural risks* – caused by acts of nature. examples include storms, fires and earthquakes.Economic risks* – occur because of changes in business conditions. examples include increase in competition, inflation, and recession.
26 Chapter 7SHOPLIFTING*Shoplifting is the act of knowingly taking items from a business without paying.Customers shoplift millions of dollars in merchandise every year.
27 Chapter 7SHOPLIFTING*Entrepreneurs can protect their businesses from shoplifters by observing suspicious behavior, hire security, post signs, check bags behind the counter, and install electronics.Behavior a potential shoplifter might exhibit might include: that a person looks around to see if someone is looking at him or her*
28 Chapter 7EMPLOYEE THEFT*Procedures for preventing and detecting employee theft include:Prevent dishonest employees from joining your company. (Screen job applicants)Install surveillance systems.Establish a tough company policy regarding employee theft.Be on the lookout.
29 OTHER TYPES OF THEFT* Robbery Credit card fraud Bounced checks Chapter 7OTHER TYPES OF THEFT*RobberyCredit card fraudBounced checksYou can prevent robberies and bounced checks by installing dead bolt locks and burglar alarms; ask for identification, accept instate checks only, or don’t accept checks at all.The downside of not accepting personal checks might be losing potential sales. *
30 Due at the end of class. Answer in complete sentences!!!!!! Chapter 7Chapter 7.3 AssignmentProtect your businessCheckpoint pg 171Checkpoint pg 172Checkpoint pg 173Checkpoint pg 175Thinking Critically pg 175 # 1 – 4Due at the end of class. Answer in complete sentences!!!!!!
31 Lesson 7.4 INSURE YOUR BUSINESS Chapter 7Lesson 7.4 INSURE YOUR BUSINESSGOALSDetermine the different types of insurance you may need for your business.Purchase insurance.
32 CLASSIFICATION OF RISK* Chapter 7CLASSIFICATION OF RISK*Result of the riskPure risks present the chance of loss but no opportunity for gainSpeculative risks offer you the chance to gain as well as lose from the risk.Control of the riskControllable risks can be reduced or possibly even avoided by actions you take. Example is installing a security system.Uncontrollable risk is one that actions have no effect on.Insurability of riskInsurable if it is a pure risk faced by a large number of people and the amount of the loss can be predicted.
33 Chapter 7TYPES OF INSURANCE*Property insurance – insures all business property against normal risks.Casualty insurance – protects a business against lawsuits.Life insurance – an insurance that is paid in the event that the holder of the policy dies.Workers’ compensation – consists of payments to workers who are injured on the job.Other kinds of insurance – include: flood, business interruption, crime and renters insurance.
34 Chapter 7BUY INSURANCE*Choose an insurance agent* – select one that works for more then one insurer. Trustworthiness of individual, amount of experience and companies the agent represents.Determine how much coverage you need – make a list of what property you own. Identify your equipment, inventory, vehicles and other significant items of value and put a value next to each. Then think about the kinds of risks you would like to insure against.Identify your asset values, debt amounts, and needs. Speak to agents, other business owners, and counselors from SCORE and the SBA.
35 ALL DUE AT THE END OF CLASS. ANSWER IN COMPLETE SENTENCES!!! Chapter 7Chapter 7.4 AssignmentInsure your businessCheckpoint pg 177Checkpoint pg 178Checkpoint pg 179Think Critically pg 179 # 1 & 2Chapter 7 Review WorksheetALL DUE AT THE END OF CLASS. ANSWER IN COMPLETE SENTENCES!!!