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Financing Your Business

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Financing Your Business Entrepreneurial Resources Bootstrapping Operating as frugally as possible and cutting all unnecessary expenses; getting by How to use ... – PowerPoint PPT presentation

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Title: Financing Your Business


1
Financing Your Business
2
Entrepreneurial Resources
  • Bootstrapping
  • Operating as frugally as possible and cutting all
    unnecessary expenses getting by
  • How to use fewer resources
  • Hire as few employees as possible (greatest
    single business expense usually)
  • Lease where possibledont buy.
  • Be creativelook for freebies, etc.
  • Longer payment terms from suppliers
  • Require customers to pay in advance
  • Sell accounts receivable to factoragent who
    handles your transactions for a fee

3
Start-Up Money
  • Personal resources
  • Savings
  • Credit cards
  • Family
  • Friends

4
Financing the Start-Up
  • Two types of financing for new capital
  • Equity sources
  • Debt sources

5
Equity Sources
  • Trade cash for some portion of ownership (equity)
    of the business
  • Equity is an ownership in the business. If they
    give you , you will have to give them part
    ownership in your company
  • AKA risk capitalinvestor is putting money at
    risk (they can either lose it or gain from it)

6
Sources of Equity Financing
  • Personal savings (1 source)
  • Friends family
  • Private investors (angels)
  • Partners (individuals, strategic alliances, etc.)
  • Venture capitalists (professionals)better for
    growth funding rather than start-up
  • State-sponsored venture capital funds used to
    promote entreprenurial growth in a state.

7
Debt Sources
  • Entrepreneur borrows money repays it with
    interestretains full ownershiploan becomes
    liability on balance sheet

8
Sources of Debt Financing
  • Banks
  • Line of creditbank lends you a certain amount at
    a certain interestcompany can borrow against it
    as needs dictate
  • Trade credit- one business gives another (often
    from suppliers)

9
Debt sources contd
  • MESBICsMinority Enterprise Small Business
    Investment Companiesdone by SBA for minorities,
    females, or disabled persons
  • Commercial finance companiesmore expensive
    because they often have easier credit terms than
    banks

10
Debt Sources contd
  • Small Business AdministrationSBAthird party
    will guarantee the loan with a bank, but they DO
    NOT GIVE LOANS
  • SBICsSmall Business Investment
    Companieslicensed through SBAprivate companies
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