Chapter 7   Powerpoint 97
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Chapter 7 Powerpoint 97

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Chapter 7   Powerpoint 97 Chapter 7 Powerpoint 97 Presentation Transcript

  • Chapter 7 Obtaining Financing
  • O BJECTIVES
      • estimate start-up costs for a new enterprise
      • identify sources of funds
      • describe differences between short-term and long-term needs
      • identify needs for additional capital
      • suggest tips for requesting loans
  • Entrepreneur: Antonio Sanchez
    • hard worker
    • positive attitude
    • perseverance
    • integrity
    View slide
  • Estimating Start-up Costs
    • Make a conservative sales estimate.
      • (better too low than too high)
    • Make a conservative expense estimate.
      • (better too high than too low)
    View slide
  • One-Time Costs
        • Equipment
        • Installations
        • decorating and remodeling
        • initial inventory
        • deposits for utilities
        • fees for accountants and lawyers
        • licenses & permits
        • advertising for “grand opening”
  • Continuing Costs
        • Salaries
        • Advertising
        • Utilities
        • Repairs and maintenance
        • Fees for accountants and lawyers
    • Rent
    • Supplies
    • Insurance
    • Interest on Debt
    • Taxes
    • Employee Training Costs
  • Types of Funds: Equity and Debt
    • Equity
        • money or capital contributed by the owners
        • no interest payments to make
        • controls business
        • more can be raised by selling stock
        • availability depends on success of enterprise
        • long-term
  • Types of Funds: Equity and Debt
    • Debt
        • money or capital that is borrowed
        • interest payments must be made
        • failure to make loan payments can bankrupt a company
        • lenders are not usually actively involved in running the company – little control
        • availability depends on economy, enterprise
        • short-term
  • Current Assets
    • Cash
    • Inventory
    • Accounts receivable
  • Fixed Assets
    • Building
    • Land
    • Vehicles
  • Key to successful business financing:
    • Obtain current assets with short-term loans
    • Obtain fixed assets with long-term loans
  • Short Term Loans
        • Vendors – trade credit
        • Commercial banks
        • Commercial loans – “collateral”
        • Accounts receivable loans
        • Revolving lines of credit
        • Inventory financing
        • Commercial finance companies
        • Factors – selling accounts receivable
  • Long Term Loans
      • Commercial Banks
      • term loans with personal guarantees
      • equipment loans
      • real estate loans
      • Commercial Finance Companies
      • Equipment Manufacturers and Distributors
  • Why would a business need additional capital?
    • sales growth
    • expansion
    • opportunities to reduce costs
    • seasonal factors
    • economic conditions
  • Tips for requesting loans
    • Select the bank carefully.
    • Prepare financial statements.
    • Make an appointment.
    • Dress like bankers dress.
    • Prepare to answer typical questions.
    • Prepare to guarantee the loan.
  • Typical Questions:
    • How do you plan to spend the money?
    • How much money do you need?
    • When do you need the money?
    • When will the loan be repaid?
    • What is the source of money for repaying the loan?