Download to read offline
Uploaded byGenerations FCU
Accessing capital
This document discusses various sources of financing for businesses, including personal savings, bank loans, equity financing, and other options. It outlines the steps to determine startup costs, anticipated revenue, and personal creditworthiness. Debt financing from banks and credit unions is described as typically requiring good credit history and being best for established businesses. Equity financing involves giving ownership in exchange for funds and is more common for startups, as it does not require debt repayment but dilutes ownership. The document advises reviewing one's personal credit profile and having owner equity of at least 10% when seeking loans. Other tips include ensuring diverse revenue sources and protecting the business with insurance.
More Related Content
Accessing capital
- 1. Accessing Capital Gener8! BusinessReady in 8 Weeks
- 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. What is theAnticipated 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. Various Sources ForAccessing 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. Debt Financing • Isborrowed 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. Advantages & Disadvantagesof 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. 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. Advantages & DisadvantagesOf 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. Know Your PersonalCredit • Your personal credit will impact your ability to secure loans • Review your most recent credit profile – www.annualcreditreport.com 9Accessing Capital
- 10. Securing Loans Througha 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. Other Considerations ForFinancing 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. Get Connected &Learn More www. mygenfcu.org Email: smallbiz@mygenfcu.org 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