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BA250 Chapter 7 Powerpoint

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  • 1. Chapter 7 How to Obtain the Right Financing for Your Business Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin
  • 2. How To Obtain The Right Financing For Your Business
    • Importance Of Proper Financing
    • Estimating Needs
    • Debt Vs. Equity Structure
    • Types/Sources Of Equity & Debt
    • What Lender Looks For
    7 -
  • 3. Capital Requirements
    • Fixed Assets
    • Working Capital
    McGraw-Hill/Irwin
    • Current Assets
    • Current Liabilities
    • Working Capital
    PhotoLink/Getty Images
  • 4. Types Of Financing
    • Debt- Lender’s Income Does Not Vary With Business Success
    • Equity- Stockholder’s Income Does Vary With Business Success
    PhotoLink/Getty Images
  • 5. Cash Budgets
    • Project Working Capital Needs
    • Reflects When
      • Revenue Collected
      • Expenses Paid
    • Considers Seasonal Revenue Fluctuations
    • Used For Obtaining Working Capital (Line Of Credit) Loans
  • 6. Equity Financing
    • Owner’s Claim Share Of Firm’s Assets
    • Proprietorship/Partnership Equals Owner’s Personal Assets
    • Corporation = Stock, 1 Share = 1 Vote
      • Common
      • Preferred
    • Investment Liquidity Depends On Market
    PhotoLink/Getty Images
  • 7. Common Stockholders
    • Real Owners Of Corporation
    • Financial Claim Is After All Others
    • Right To Vote
    • Control Management
    Royalty-Free/CORBIS
  • 8. Small Business Share Of Stock
  • 9. Preferred Stockholders
    • Claim To Profits
      • Before Common Stock Dividends
      • Not Legally Enforceable
    • No Voting Rights
    • Fixed Par Value & Dividend
    • Cumulative Dividend
  • 10. Small Company Offering Registration (SCOR)
    • Raise Up To $1 Million
    • Traded
      • AMEX
      • NASDAQ- OTC
    Ryan McVay/Getty Images
  • 11. Sources of Equity Financing
    • Self
    • Small Business Investment Companies (SBICs)
    • Venture Capitalists
    • Angel Capitalists
    • Other
      • Business Incubators
      • Employee Stock Ownership Plans (ESOPs)
      • Customers
    PhotoLink/Getty Images
  • 12. Bartering
    • Companies Swapping Items Of Equal Value
    • Uses
      • Business Travel
      • Debt Collection
      • Closing A Sale
      • Employee Perks/Bonuses
      • Line Of Credit
    • Subject To Tax
    Artville/Getty Images
  • 13. Accounting For Bartering
    • Items Dissimilar- Gain vs. Loss
    • Items Alike- Use Book Value Of Old Item
    Janis Christie/Getty Images
  • 14. Debt Financing
    • Comes From Lenders
    • Must Be Repaid
      • At Specified Interest Rate
      • Within Agreed-Upon Time Span
    • Legal Claim On Assets Before Stockholders
    • Equity = Safety Net For Lenders
    Ryan McVay/Getty Images
  • 15. Debt Financing Advantages
    • Cost Of Debt Lower Than Equity
    • Interest Payments Deductible
    • Debt Funding Allows For More Capital To Be Raised In Addition To Equity
    • Since Debt Payment Is Fixed It Allows Owner To Keep Remaining Profits
    • Leverage
    Royalty-Free/CORBIS
  • 16. Debt Securities
    • Bond
      • Publicly Issued
      • Large Companies
    • Loan
      • Commercial Banks
      • Insurance Companies
      • Finance Companies
    Royalty-Free/CORBIS
  • 17. Securities’ Maturities
    • Short-Term- Less Than 1 Year
    • Intermediate- 1 To 5 Years
    • Long-Term- 5 Years+
    Royalty-Free/CORBIS
  • 18. Bonds
    • Standard Denomination
    • Method Of Interest Payment
    • Method Of Principal Payment
    Royalty-Free/CORBIS
  • 19. Types Of Loans
    • Mortgage- Secured By Real Estate
    • Chattel Mortgage- Collateral Other Than Land, e.g., Machinery, Vehicles, Inventory
    • Asset-Based- Secured By AR & Inventory
    • Unsecured- Personal Guarantees
    Royalty-Free/CORBIS
  • 20. Sources Of Debt Financing
    • Trade Credit
    • Commercial/Other Financial Institutions- Line Of Credit
    • Credit Cards
    • Insurance Companies
    Ryan McVay/Getty Images
  • 21. Suppliers Of Small Firm Credit
  • 22. Traditional Sources Of Small Firm Credit Source: Small Business Administration, http:// www.sba.gov/advo/research/banking.html
  • 23. Non-Traditional Sources Of Small Firm Credit Source: Small Business Administration, http ://www.sba.gov/advo/research/banking.html
  • 24. Smal l Business Administration
    • Guaranteed Loans- 7(a) = 30 to 40% Of Long-Term Loans
      • Purchase Land, Buildings, Equipment
      • Working Capital
      • Refinance Existing Debt
      • Seasonal Lines Of Credit
    • Specialized Programs
    • SBICs
    • U.S. Department Of Agriculture
    Ryan McVay/Getty Images
  • 25. SBA Required Documents
    • Narrative Business Plan
    • Resumes
    • Loan Request
      • How To Be Used
      • List Of Assets
    • Financial Statement- 3 Years
      • Firm’s
      • Personal
    • Collateral
    Royalty-Free/CORBIS
  • 26. Lenders Want To Know
    • Startup
      • Can You Live Without Income From Business?
      • Loan Repayment?
      • Collateral?
    • Existing
      • Track Record
      • Future Difference?

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