This document discusses financing options for startups, including: 1. Bootstrapping using savings, credit cards, or loans from friends and family is common and allows founders to take tiny bets with money they can afford to lose. 2. Other options include crowdfunding sites, angel investors, venture capital, and traditional lenders like banks - though banks often don't lend to startups with less than two years of business or for small loans. 3. The SBA offers loan guarantees but not direct loans, and micro-lenders provide smaller loans and services to those who can't access traditional financing. State and local programs also exist.

1. Stage 3: Preparing to Grow
Lesson 4: Financing Your Business
1

2. Review
• Concepts and questions from previous lesson(s)
• Elevator pitch
• Facilitator will share with students learning
objectives for the day:
2

3. Learning Objectives
• Define targeted investors for your start up
• Understand the Investment process and needs of
investors
• Identify how due diligence happens and how to be
prepared
3

4. • Feature set for MVP
• Validated learning
• Pivots
Problem worth solving? Built something people want? How accelerate growth?
Ideal time to
raise funding Concept Source: Blank Four Stages
to the Epiphany; Maurya, Running Lean
Image Source: Startitup

5. Considerations
• Do I have the resources around me to succeed?
• Who is a great investor for your company?
• Where do you find qualified investors?
• What are you going to use the money for?
• Where will that investment take you?
• How much money do you need?
• Are you ready?
5

6. Start-Up Capital Sources
• Bootstrap
• Credit Cards & Savings
• Friends & Family
• Crowd-Funding (Kiva, KickStarter, IndieGoGo…)
• Angel Investors
• Venture Capital
• Investment Banks & Private Equity
• Banks & SBA Loans
• Fed/State/County/City Programs
6

7. And another thing about Partnerships
• Potential source of capital
• Complexity
• Formal Partnership Agreement
• Intangibles
7

8. What’s Best? (What’s Possible?)
• Loan vs. Gift
• Debt vs. Equity
• Timing (Pre-Sale, Finance Purchase Orders,
Factoring/Loans against Receivables)
• No Free Lunch – or Grants, either
• “Skin in the Game”
8

9. Bootstrap, Savings, Credit Cards
• Most common financing method, along with
Friends/Family
• Caution: Promotional Rates
• Tiny bets & incremental funding*
• What you can afford to lose
• Borrowing from 401Ks
9

10. Friends, Family, Angels
• Personal relationship – and network
• Invest in the person more than the business
(usually)
• Clarity about nature of investment
• Ownership, interest, repayments
10

11. What (all) Funders Want
• Loan Amount & Use of Funds
• Legitimacy
• Business-Like (accuracy, responsiveness)
• Clarity (what and how)
• Meaning & Purpose
• Impact
• Alignment with THEIR goals
11

12. Crowdfunding
• Kiva (USA)
– Loans $10K max/3 year repayment
• Kickstarter, Indiegogo, etc.
– Pre-Sale model
12

13. Venture Capital
• Typically 2nd – stage funding
• VCs are looking for high growth, big profits
• May be a combination of equity & debt
• Strongly associated with specific types of
businesses – and not with others
13

14. Traditional Lenders
• Tend not to lend to “start-up” businesses (less than
two years in business)
• Some banks don’t work with “small” loans at any
stage
• Collateral required
• Strict lending guidelines
14

15. SBA: Small Business Administration
• Self-sustaining Federal program
• No direct loans to individual businesses
• Offer loan guarantees to lenders – not borrowers (loan
amounts up to $5M +)
• Micro-Loan Program (up to $50K) through Intermediaries
(several in NJ)
15

16. What’s a Micro-Lender?
• Lend to those who cannot access traditional financing
– Smaller loan amounts
– Not enough time in business
– Poor credit or “thin” credit
– Additional services (training, technical assistance)
• Short-term borrowing
• Establish credit
Several in New Jersey: UCEDC, CBAC, RBAC,
Intersect Fund, Isles, Inc., ACCION, Finanta, etc.
16

17. State, County, & Local
• Burlington County Economic Development – Small
Business Loan Program
– Contact: Mark Remsa, Director mremsa@bcbridges.org
• State of NJ – various programs
– www.nj.gov/njbusiness/financing/
17

18. Three-Four-Five C’s
• Credit
• Character
• Collateral
• Capacity
• Conditions
18

20. What (all) Lenders Want
Financials
• Projections & Cash Flow Cycle
• Breakeven Point
• Personal Financial Statement
• Tax History
20

21. • Business Plan
• Tax Returns (Personal & Business)
• Financial Statements – historical and/or
projections
• Personal Financial Statements
• Other Supporting Documents

22. Business Plan
• Executive Summary
• Company Overview
• Industry Analysis
• Customers
• Competitive Analysis
• Marketing Plan
• Management
• Financial Statements &/or Projections
• Appendix
22

23. Deal Killers
23
(For any Federal-Funds program, including SBA)
Default on any government loan, including student loans
Recent bankruptcy
Failure to file tax returns
All owners not participating in loan
Not a US citizen or legal resident (“documented”)

24. Questions

25. 25