1. FINANCE, PROTECT, AND INSURE YOUR BUSINESS
Entrepreneurship
4/21/2017
Chapter 7
FINANCE, PROTECT, AND INSURE YOUR BUSINESS
7.1 Put Together a Financial Plan
7.2 Obtain Financing for Your Business
7.3 Protect Your Business
7.4 Insure Your Business
Chapter 7

2. Lesson 7.1 PUT TOGETHER A FINANCIAL PLAN
Chapter 7
Lesson 7.1 PUT TOGETHER A FINANCIAL PLAN
GOALS
Calculate your start-up costs.
Create a cash flow statement, an income statement, a balance sheet, and a personal financial statement.

3. PREPARE FINANCIAL STATEMENTS
Chapter 7
PREPARE FINANCIAL STATEMENTS
List of start-up costs
Cash flow statement
Income statement
Balance sheet
Personal financial statement

4. Chapter 7
START-UP COSTS
Start-up costs are the one-time-only expenses that are paid to establish a business.
Common start-up costs include:
Equipment and supplies
Furniture and fixtures
Vehicles
Remodeling
Legal and accounting fees
Licensing fees

5. Chapter 7
CASH FLOW STATEMENT*
A cash flow statement describes how much cash comes in and goes out of a business over a period of time.
Forecast revenues
Forecast operating expenses
Prepare the cash flow statement
Best and worst case

6. Chapter 7
CASH 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 7
INCOME 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 statement
Difference from a cash flow statement

8. INCOME STATEMENT vs Cash Flow Statement*
Chapter 7
INCOME STATEMENT vs Cash Flow Statement*
An income statement might show revenues you have not received and expenses you have not yet paid
A cash flow statement only records money that actually has been received or paid.

9. Chapter 7
INCOME 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 7
BALANCE 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 7
BALANCE SHEET
Types 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 7
PERSONAL 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 7
Chapter 7.1 Assignment
Putting together a Financial Plan
Checkpoint pg 159
Checkpoint pg 160
Checkpoint pg 162
Checkpoint pg 163
Think Critically pg 163 # 1 & 2 only
ALL DUE AT THE END OF CLASS. Answer in complete sentences!!!!!!!!!!!

14. Lesson 7.2 OBTAIN FINANCING FOR YOUR BUSINESS
Chapter 7
Lesson 7.2 OBTAIN FINANCING FOR YOUR BUSINESS
GOALS
Consider 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 7
Bank Loans
Debt Capital
Money loaned to a business with the understanding that the money will be repaid with interest. In a certain time period.
Collateral
Property 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 7
BANK LOANS*
Types of bank loans
Secured 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 loans
Line 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 7
REASONS A BANK MAY NOT LEND MONEY*
The business is a start up
Lack of a solid business plan
Lack of adequate experience
Lack of confidence in the borrower
Inadequate investment in the business

18. SMALL BUSINESS ADMINISTRATION LOANS*
Chapter 7
SMALL BUSINESS ADMINISTRATION LOANS*
SBA loan assistance
Requirements of SBA loans
Apply for an SBA loan
Two types of loans given by the SBA
A cash loan is a full loan repayable to the SBA
A 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 7
REQUIREMENTS 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 7
OTHER SOURCES OF LOANS
Small Business Investment Companies—SBIC
Minority Enterprise Small Business Investment Companies—MESBIC
Department Of Housing And Urban Development—HUD
Economic Development Administration—EDA
State governments
Local and municipal governments

21. Department of Housing and Urban Development (HUD)
Chapter 7
Department 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 rates
Low average incomes
Few businesses

22. FINANCE YOUR BUSINESS WITH EQUITY CAPITAL*
Chapter 7
FINANCE 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 capital
Personal financing
Friends and family
Venture capitalist

23. DUE AT THE END OF CLASS. ANSWER IN COMPLETE SENTENCES!!!!!
Chapter 7
Chapter 7.2 Assignment
Obtain financing for your business
Checkpoint pg 166
Checkpoint pg 167
Checkpoint pg 168
Checkpoint pg 170
Thinking Critically pg 170 # 1 – 3
DUE AT THE END OF CLASS. ANSWER IN COMPLETE SENTENCES!!!!!

24. Lesson 7.3 PROTECT YOUR BUSINESS
Chapter 7
Lesson 7.3 PROTECT YOUR BUSINESS
GOALS
Categorize business risk.
Identify security precautions to protect your business from different types of theft.

25. Chapter 7
BUSINESS RISK*
Human risks* – caused by the actions of employees and customers. examples include accidents, theft, and robbery
Natural 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 7
SHOPLIFTING*
Shoplifting is the act of knowingly taking items from a business without paying.
Customers shoplift millions of dollars in merchandise every year.

27. Chapter 7
SHOPLIFTING*
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 7
EMPLOYEE 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 7
OTHER TYPES OF THEFT*
Robbery
Credit card fraud
Bounced checks
You 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 7
Chapter 7.3 Assignment
Protect your business
Checkpoint pg 171
Checkpoint pg 172
Checkpoint pg 173
Checkpoint pg 175
Thinking Critically pg 175 # 1 – 4
Due at the end of class. Answer in complete sentences!!!!!!

31. Lesson 7.4 INSURE YOUR BUSINESS
Chapter 7
Lesson 7.4 INSURE YOUR BUSINESS
GOALS
Determine the different types of insurance you may need for your business.
Purchase insurance.

32. CLASSIFICATION OF RISK*
Chapter 7
CLASSIFICATION OF RISK*
Result of the risk
Pure risks present the chance of loss but no opportunity for gain
Speculative risks offer you the chance to gain as well as lose from the risk.
Control of the risk
Controllable 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 risk
Insurable if it is a pure risk faced by a large number of people and the amount of the loss can be predicted.

33. Chapter 7
TYPES 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 7
BUY 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 7
Chapter 7.4 Assignment
Insure your business
Checkpoint pg 177
Checkpoint pg 178
Checkpoint pg 179
Think Critically pg 179 # 1 & 2
Chapter 7 Review Worksheet
ALL DUE AT THE END OF CLASS. ANSWER IN COMPLETE SENTENCES!!!