How to Finance Your Business Start-Up

1. How to Finance Your
Business Start-Up
Aizhan Tursunbayeva
24.09.2011

2. How to Finance Your Business Start-Up
Access to Credit
Objective:
Understanding how to obtain financial
support for your business during start-up
and going forward.

3. Criteria for Success
 Business Plan including financial information: Balance
Sheets, P&L Statements, Cash Flows, Budget and Time Line.
 Realistic Sales and Revenue Expectations
 Know your Opportunities and Risks
 Listen to Objections
 Learn from Criticism
 Understand your Finance Source and its Expectations.
 Provide an Exit Strategy

5. What Constitutes an Effective
Business Plan
 Mission Statement
Two or three statements that state your mission,
vision and values.
 Key Business Activities
Determine what your company sells/services.
What is your market?
 Products and Service
How does your product add value?

6. What Constitutes an Effective
Business Plan
 Sales and Marketing
Sales projections, customer pricing, forecasts
and opportunities and risks
 Operating Plan
Facilities, resources and processes used to run
your business
 Human Resources
Structure and people to operate your business.
Retention of key employees

7. What Constitutes an Effective
Business Plan
 Financial Plan
Credible projections, stating your financial
needs, balance sheet, P&L statements and
cash flow budget.
 Future Growth
How will your company grow in 3 to 5 years?
How do you position your company?

8. What Constitutes an Effective
Business Plan
 Exit Strategy-Four Ways to Go
 IPO
 Sale to a Competitor or Partner
 Sale to Employees
 Family Inheritance
 Close
 A properly planned exit will determine how you finance your start-
up
 A properly planned exit can be a lucrative way to realize the value
you have created

9. Starting a Business
 Assessment
Develop ideas / business potential
 Your Business Plan
How do you plan to finance and market your
business?

10. Starting a Business
 Financing
How to finance your business
 First Year
Managing your day-to-day operations and
planning growth

11. Obstacles to Financing a
Start-Up
 No track record
 Difficult to sell concept
 Lack of assets
 No record of successful management
 Market acceptance

12. Sources of Finance
 Family, friends
 Personal credit cards
 Banks
 Venture capital funds
 Finance companies
 Development Banks
 Governmental programs

13. Sources of Finance
 Every source has its own expectations
but all want to profit from their investment
 The greater the risk the greater the
expectation of high returns
 Develop your “Value Proposition”

14. Sources of Finance:
Banks
WHAT DO BANKS LOOK FOR?
 Professional Profile
Evaluate your ability to manage the project.
A clear business plan.
 Project Viability
Structured and short comments that cover
all the elements of your business

15. Sources of Finance:
Banks
TIPS:
 Prove or qualify every conclusion you make
 Stick to your project – one clear and complete
idea to many vague possibilities
 Help your banker to understand – Avoid
technical details or language unless necessary

16. Sources of Finance:
Banks
 Show how you will succeed
 Ability to repay your obligations
Your forecast should prove how the
project will be profitable.
 Keep it to a business proposition
Concentrate on viability

17. Sources of Finance:
Venture Capital
 Want high returns, equity, an exit strategy, a
position on your board and will judge your
proposal by the companies management
experience
 Will provide funding on a success basis only
and will withdraw funds if the company does not
meet its projections
 Business Plan and complete financial
projections

18. Sources of Finance:
Finance Companies
Specialized lenders – Products include
leasing, subordinated debt, personal
quarantines, etc.

19. Sources of Finance:
Loans and Grants
 Loans or leases
 Complements other lenders
 Finance start-ups

20. How to Deal with Your Lenders
 Keep them apprised of your business
 Provide periodic financial information
 Let them know the good and bad news. It
is best that any bad news comes from you
and you can explain how you plan to
overcome the problem

21. Types of Credit
 Loans
Requires collateral
 Credit – Short and Long Term
 Leasing
Asset based lending, the asset is the collateral, the terms fit
the equipment and normally does not require prior credit
history
 Credit Lines
Use of personal credit facility. Expensive and
normally is not sufficient

22. Questions