Accessing capital


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Tips for how to access capital for small businesses can

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Accessing capital

  1. 1. Accessing Capital Gener8! Business Ready in 8 Weeks
  2. 2. 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
  3. 3. 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
  4. 4. 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) 4Accessing Capital
  5. 5. 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 5Accessing Capital
  6. 6. Advantages & Disadvantages of Debt Financing 6Accessing Capital 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
  7. 7. Equity Financing 7Accessing Capital • 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
  8. 8. Advantages & Disadvantages Of Equity Financing 8Accessing Capital 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
  9. 9. Know Your Personal Credit • Your personal credit will impact your ability to secure loans • Review your most recent credit profile – 9Accessing Capital
  10. 10. 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? 10Accessing Capital
  11. 11. Other Considerations For Financing 11Accessing Capital • 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
  12. 12. Get Connected & Learn More www. Email: Sign Up for our business classes Connect with us via social where we talk personal and small business tips to help you reach your money goals