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)

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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

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Advantages & Disadvantages of Debt Financing

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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

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• 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

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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?

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Other Considerations For Financing

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• 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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