Financing Alternatives by Aberdeen Funding
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Transcript of Financing Alternatives by Aberdeen Funding
Financing Alternatives
FUNDING SOURCES
Personal Resources
Family and Friends
Banks
Small Business Administration
Non-traditional Sources
Outside Investors
A combination of the above
Use the right tool for the job ….
Understand the implications of using different sources
Don’t buy a car on your credit card (Obvious, right?)
Source FOR AGAINST
Personal Resources
SAVINGS Independence Risk of Loss Opportunity Cost
CREDIT CARDS Convenient Very short term Personal Credit Risk
HOME EQUITY Somewhat inexpensive Long Term Lose your home?
Family and Friends
Who needs a lighthouse in the daytime?
Banks
Banks have constraints, limits on Loans and will probably not lend you enough.
Bankers are not supposed to take risks.
Requirements & Features of Bank Loans
Trading History. Hard for start-ups
Usually looking for 3 years in business & history
Business must usually be profitable
There must be adequate Collateral
Sufficient measurable Cash flow to repay loan
Comparatively inexpensive
Owners credit history and financial strength is important
What is the purpose of the loan?
Financial Statements
Fixed Loan Amount
An SBA Loan is a bank Loan guaranteed by Govt.
Different SBA programs
Small Business Administration
Different SBA programs
An SBA Loan is a bank Loan guaranteed by Govt.
Non-traditional Sources
Sale of Shares in business to outsiders Loss of control
Venture Capital Large amounts, loss of control
Preferred Stock Paying fixed amounts, voting issues
Factoring, also known as Accounts Receivable Financing
Grows with you, flexible, easy, based on value of sales
Asset-based lending Based on fluctuating values
Is the sale of invoices for sales made to customers
Security rests on the credit-worthiness of customers
Excellent tool to finance growth
Outsourcing of Receivables function
Sales volume determines extent of financing
Protects against bad debts
Finances start-ups and established businesses
The financial strength of business and owner is not a deciding point
Allows for outsourcing of Receivables function
Does not affect control
Features of Factoring
ASSETS LIABILITIESCash $80,000 Payables $60,000
Receivables $100,000 Loan from bank $80,000
Current Assets $180,000 Current Liability $140,000
Plant $100,000 Stock $50,000Accrued Income $90,000
Total Assets $280,000 Total Liability & Equity $280,000
Balance Sheet & Off Balance Sheet
ASSETS LIABILITIESCash $80,000 Payables $60,000
Receivables $20,000
Current Assets $100,000 Current Liability $60,000
Plant $100,000 Stock $50,000Accrued Income $90,000
Total Assets $200,000 Total Liability & Equity $200,000
100 : 60 Liabilities are covered 1 : 66
180 : 140 Traditional 1 : 28
Why wait 30 to 90 days for your receivables?
Factor your invoices to free up working capital.
www.AberdeenFunding.com