A bank may not lend money for several reasons: lack of a solid business plan, inadequate experience of the business owner, lack of confidence in the borrower, or insufficient personal investment in the business by the entrepreneur. The document discusses obtaining financing through bank loans, Small Business Administration loans, and equity capital. Bank loans can be secured by collateral or unsecured. SBA loans have requirements such as the business being considered small and the owner being unable to get financing elsewhere. Other sources of financing discussed are small business investment companies and state or local government programs.
2. FINANCE, PROTECT, AND
INSURE YOUR BUSINESS
Put Together a Financial Plan
Obtain Financing for Your
Business
Protect Your Business
Insure Your Business
3. Review
What are the one time only expenses
that are paid to establish a business
Start-up costs
Describes how much cash goes in and
out of a business over a period of time
Cash flow statement
Expenses that are incurred by a
business every month
Operating expense
4. Review cont.
A financial statement that shows how
much money a business earns or loses
Income statement
Shows the assets, liabilities, and capital of
a business at a particular point in time
Balance Sheet
What is the accounting equation?
Assets= Liabilities+ Owner’s equity
5. Review cont.
Types of Assets
Fixed, current, A/R
Types of Liabilities
Long-term, current, A/P
The amount a company estimates it will
not receive from customers
Uncollectible accounts
Lowering of an assets value to reflect its
current worth
depreciation
6. OBTAIN FINANCING
FOR YOUR BUSINESS
Consider different types of
bank loans.
Explain Small Business
Administration loans.
Evaluate other sources that
can provide debt capital.
GOALS
7. Many companies take out loans from
banks. You obtain debt capital when
you borrow from banks. Debt capital is
money loaned to a business with the
understanding that it will be repaid, with
interest, in a certain time period.
9. Secured Loans
Secured loans are backed by
collateral, which is property that the
borrowers forfeit of he or she defaults
on the loan.
Types of secured loans
Line of credit- money whenever the
borrower needs it.
Short-term loan- made for a specific
purpose; repaid within a year.
Long-term loan- payable over a period
longer than a year.
10. Unsecured Loans
Loans that are not guaranteed with
property. These loans are only made to
the bank’s most creditworthy customers.
11. REASONS A BANK
MAY NOT LEND MONEY
The business is a start up- has no record of
repaying loans
Lack of a solid business plan- poorly written
Lack of adequate experience
Lack of confidence in the borrower
Inadequate investment in the business-
banks are suspicious of entrepreneurs who don’t
invest their own money
13. REQUIREMENTS OF SBA LOANS
Your business must be considered a small business.
Your business must not be the leader in its field.
Your business must comply with all federal
employment laws.
Your business cannot create or distribute ideas or
opinions.
You must have been unable to obtain financing from
a commercial bank.
You must invest a reasonable amount of your own
money in the venture.
You must provide adequate collateral.
14. OTHER SOURCES OF LOANS
Small Business Investment Companies—
SBIC
Minority Enterprise Small Business
Investment Companies—MESBIC
Department Of Housing And Urban
Development—HUD
Economic Development Administration—EDA
State governments
Local and municipal governments
15. FINANCE YOUR BUSINESS
WITH EQUITY CAPITAL
Equity capital is money invested in a
business in return for a share in the
business’s profits.
Sources of equity
Personal financing
Friends and family
Venture capitalist- people or companies
who make a living by providing loans to
start-up businesses