Presentation on theme: "FINANCING YOUR BUSINESS"— Presentation transcript:
1 FINANCING YOUR BUSINESS WorkshopV2.2FINANCING YOUR BUSINESS
2 4 Manasota SCORE Workshops Handouts1Visual#1#2#3Starting or Buyinga BusinessOverview234Small BusinessStart-up andManagementGuideBusinessPlanningMarketing& SalesFinancingAvailable for $15
3 Workshop Objectives Financing Your Business Determine amount of capital neededIdentify information needed by lenderIdentify types and sources of fundsPresent key credit approval criteria
4 How Much Capital is Needed? 3 Major ConsiderationsTo open the business doorsTo stay open until you make profitTo manage periodic “ups” and “downs”
5 1. Capital to Open Doors Fixed Assets - Real estate, leases, equipment Soft Costs Insurance, liability, legal, accounting supplies, compensation, utilities . . .Inventory Product ready to sell
6 2. Capital Until Making Profit Monthly projection of cash flow Based on Business PlanAdd cash flow short fall for initial monthsOperational working capital requirements - Until “cash in” exceeds “cash out”
7 3. Periodic “Ups’ & “Downs” Cash Flow projections for 12 months - After business becomes profitableAnalyze seasonal variances Anticipated profit fluctuations Unanticipated market changesDetermine additional capital that may be needed and when
8 Investor’s Primary Needs Assurance that repayment will be made in timely manner as promisedDetailed Business Plan from which their decision will be made: YES (grant loan) NO (deny loan) – too high a riskHave you begun developing your Business Plan?
9 Business Plan Outline (Typical) Table of Contents (Easy Reference)Executive SummaryCompany Description & MissionProducts and ServicesMarketing PlanOperational PlanManagement and Organization .Personal Financial Statement . . .Start-up Expenses & CapitalizationFinancial PlanAppendices3579111316202426
10 Five C’s of Lending Character - Resume, references & experience Credit Personal & Business credit reportsCapital Borrower’s investment in ventureCash Flow - Ability to operate at sufficient level to repayCollateral Assets pledged to secure loan
11 Projected Financial Statements Opening Balance Sheet Assets and LiabilitiesProjected Monthly Cash Flows For each of first 12 monthsReferences Credit and Professional
12 Types of CapitalEquity Owners investment at stake Normally 30% or moreCredit & Debt - Borrowed funds and leases
13 Why is allocating personal equity such SavingsInvestmentsHome EquityFamily and/or FriendsPartnersLife Insurance Cash ValueAngels/ SBDC’sCombination of AboveWhy is allocating personal equity suchan important decision?
14 Credit Financial Institution Loans Trade Supplier Credit Seller Financing or Fixed AssetsOperating Lease Short Term or Long TermFranchisor LoansCDC and/or SBDC Loans
15 Limited guarantees to qualified lenders SBA Basic LoansLimited guarantees to qualified lendersLoan AmountPrime PlusRepaymentCriteria< $25,000(Express)4.25%< 7yrsCharacter< $25,000(Express)4.75%> 7yrsCharacter$25,000 to $50,0003.25%< 7yrsBusiness Plan$25,000 to $50,0004.25%> 7yrsBusiness PlanOver $50,0002.25%< 7yrsBusiness PlanOver $50,0002.75%> 7yrsBusiness Plan
16 Limited guarantees to qualified lenders SBA 504 LoansLimited guarantees to qualified lenders504 Loan – Fixed Assets Land plus new building construction Renovate existing buildings % Down % SBA % Bank Loan to 20 year repayment
17 Grants Very Limited Availability! Most provided for research Institutions of Higher LearningSources for Grants: Grants.gov Gulf Coast Community Foundation (941) Angel Capital – startups in FL (941) Venture Capital – Brokerage Firms
18 Venture Capital Lenders in Area Other SourcesVenture Capital Lenders in AreaBusinessFundingResource.comEconomic Development Corporation of Sarasota
19 Loan Package Cover Letter Up-to-date Business Plan - Personal Financial Statement - Projected Financial Expectations - Credit References (Typically 3) - Professional References (Typically 3)Specific Loan Request - Amount, Term & Sources of Repayment
20 Potential Lenders in Area Bank of Venice Mark Wilcox ( )Landmark Bank - Doug Johnson ( )Horizon Bank Jeff Chapin ( )Fifth Third Bank - Chris Perkins ( )Comerica Andrew Reeves ( )Bank of America Leslie Woodard ( )AmSouth JJ Miranda ( )Northern Trust Helen Nugent ( )
21 Loan Approval Criteria (6 P’s) People (Honest, dependable & capable)Purpose (Legitimate business need)Payment within reasonable period - High probability of repaymentProtection (Repayment alternative source)Perspectives (Profit needs & expectations)Policy (Types of loans and acceptable risks)
22 1. People Good Credit History Related Management Experience Related Business ExperienceSolid References - Character - Background - Dependability
23 How will your venture yield adequate 2. PurposeLegal Type of BusinessLogical Relation to background & experienceProductive Will yield cash for repaymentHow will your venture yield adequatecash for repayment?
24 3. Payment Source of Prepayment - Tied to use of loan proceeds Projected Financials - Reflect ability to repay on timeCollateral - Alternate sources for repayment
25 4. Protection Pledge of Assets of Business Personal Guarantees SBA Limited Guaranty for: Startups Low Equity Low Collateral Loans
26 5. Perspective Risk/Reward Relationship Lender Profit and Loss Interest Income 6.50%Interest Expense %Operating Costs %PROFIT %1 Bad Loan = Profit on 67 good ones!
27 6. PoliciesBank’s philosophyBank’s risk strategyNo two banks alike
28 Examples of Types of Credit Lines – Short term (90 day) projectionTerm – Long term (Real Estate & Equity)Revolvers – Accounts Receivable FinancingOperating Lease – Short term rentalFinancial Lease – Long term rentalCredit Card – Convenient but very costlyHome Mortgage – Long term
29 Financing Your Business Small BusinessStart-up andManagementGuideLoads of valuable informationfor only $15Other WorkshopsBusiness PlanningMarketing & SalesStarting or Buying a New BusinessLive Your Dream. SCORE Can Help.To find the office nearest you, callSCORE toll-free at 1-800/ ,or visit and clickon “Find SCORE.”