Entrepreneur Express, Jonah Fogel 09

Financial Financial Considerations Considerations for Your for Your Small BusinessSmall Business

Front door to the land-grant system

Research-based education 107 county offices 6 4-H4-H Education CentersEducation Centers 4 ARECs Four Program Areas: ANR,

FCS, 4-H, CV

Inventing the FutureInventing the Futurehttp://www.ext.vt.eduhttp://www.ext.vt.edu

Financial Plan: By the numbersFinancial Plan: By the numbers

Elements of a Business Plan Executive Summary Business Description Marketing Strategies Competitive Analysis Design and Development Plan Operations and Management Plans Financial Plan

Test assumptions Develop funding strategies Communicate risk

Be Prepared: Financial Questions . . .

• How much money do you need?• When will you need it? • Have you identified least-cost alternatives?

• How much do you expect to make?• What are your profit goals?• How much can you charge for it? How much is

customer willing to pay for it?• How many customers will you need in order to

cover expenses?

Your Capital PortfolioYour Capital Portfolio Start-up Capital

Working Capital

Cash Reserve

Look for ways to conserve capital needs

Be Prepared: Think Numbers . . .

Raw product Labor Facility costs / rent Utilities Transportation Insurance (property loss,

liability loss, product liability, business interruption, disability, loss of key employees)

• Licenses• Accounting &

legal• Advertising• Equipment

(leasing / purchasing), technology, infrastructure

• Office expenses• Loan interest

Start-up / Ongoing ExpensesStart-up / Ongoing Expenses

7

Where Do Business Funds Come From? Where Do Business Funds Come From?

Your $$ (Savings, Friends and Family, Credit Cards, Assets, etc.)

Equity Financing (investors who provide cash in exchange for ownership stake)

Debt Financing (repayable loans – such as from commercial lenders, special category loans/government loans, etc.)

Your Resources / Sources of Capital

Commercial lenders SBA-guaranteed loans Private loans Vendor credit Other Government Friends and Family

LeasingCredit CardsAngel InvestorsVenture Capital SavingsOther

LoansLoans Types

Real estate & Equipment Working capital Business expansion & acquisition Cash flow management (long-term financing) Receivables financing Lines of credit (emergency funds)

Bank Department Personal Business

The Bank Wants to Know… How much money do you need? How will you use the money? Describe the benefit

to your business. How & when will you pay it back? Are you credit worthy? What is your experience, training, and business

management skill? What is your collateral? What is your back up (contingency) plan?

Questions for your banker… Bank’s policy on small-business lending? Restrictions or covenants? Terms and interest rate options? Flexibility/tailor loan to needs? Exit strategies? Loan officer? Specialty areas? Names of existing customers?

SCORE, 1997. How to choose the best bank for your business, Inc. Magazine.

Financial Stewardship

Be able to diagnose what is happening with your business and respond appropriately.

Exercise your creativity by constantly Conserve capital Add value Increase revenue

““Human creativity is the ultimate economic resource.”Human creativity is the ultimate economic resource.” -Richard Florida-Richard Florida

Track your Bottom-line Build a basic knowledge of business finance Measure it – then manage it

Develop Effective Record-keeping, Accounting, and Financial Management systems

Look for patterns over time Use software

www.quickbooks.com www.peachtree.com

Bottom-line . . .Trends

Current cash position Cash disbursements New sales Accounts receivable (beginning balances,

outstanding credit, cash receivables) Accounts-payable payments Order backlog Productivity (sales per employee, etc.)

Be Creative and Adaptable

…but stay true to your vision and mission

View setbacks as learning opportunities

Are risks acceptable?

The Economy: Trends are Mixed

Tougher to get credit but banks have money Loans to start-ups declining Retail and building materials sales are mixed Housing market is declining slower Unemployment is high but stabilizing Stock market is doing better ARRA monies are available

http://www.stimulus.virginia.gov/

Selected Financial Resources

Financial Resources . . .

U.S. Small Business AdministrationU.S. Small Business Administration Richmond District Office

The Federal Building400 North 8th Street, Suite 1150

Richmond, VA 23219-4829(804) 771-2400 Fax 771-2764

E-mail:  richmond.va@sba.gov

Ronald E. Bew, District Director 

http://www.sba.gov/financing

Financial Resources . . .

SBASBA Basic 7(a) Loan Program

Lenders participate with SBA in 7(a) program. Up to $2 million with 90% guaranty. Business applies to a lender for financing. Repayment ability from cash flow of business is primary

consideration in loan decision process but good character, management capability, collateral, and owner's equity contribution are also important.

SBASBA Micro-Loans

Small loans to start-up, newly established, or growing small business concerns.

Maximum of $35,000 ($13,000 average). Maximum term is 6 years. Interest rates range between 8 to 13%. Apply through Microlending Intermediaries

Financial Resources . . .

SBA SBA Startup Guidehttp://www.sba.gov/smallbusinessplanner/plan/

getready/serv_sbplanner_stguide.html How to Write a Loan Proposal

Financial Resources . . .

SCORESCORE http://www.score.org

Business Funding DirectoryBusiness Funding Directory http://www.businessfinance.com

Venture Capital Information GuideVenture Capital Information Guide http://www.capital-connection.com

Virginia Department of Business AssistanceVirginia Department of Business Assistance Virginia Small Business Financing AuthorityVirginia Small Business Financing Authority http://www.dba.virginia.gov/financing 1-866-248-8814

Financial Resources . . .

National Federation of Independent Business, National Federation of Independent Business, Business ToolboxBusiness Toolbox http://www.nfib.com/page/toolsHome

Virginia Business Information CenterVirginia Business Information Center http://www.dba.virginia.gov/virginia/default.asp

804-371-0438, toll-free at 1-866-248-8814

Financial Resources . . .

Active CapitalActive Capital (angel investor network)

http://www.activecapital.com

Business statisticsBusiness statistics http://www.bizstats.com

Entrepreneur.com, Money and FinancingEntrepreneur.com, Money and Financinghttp://www.entrepreneur.com/money/finance/index.html

Fintel Scorecard Industry BenchmarkingFintel Scorecard Industry Benchmarking http://www.fintel.us/cms/DesktopDefault.aspx

Financial Resources . . .

Energy-related business

USDA Rural DevelopmentUSDA Rural Development Renewable Energy and Energy Efficiency Grand

and Guaranteed Loan (Section 9006) Program www.rurdev.usda.gov/rbs/farmbill Application: www.rurdev.usda.gov.rbs.farmbill/tools.html http://www.meeteetsecd-wy.gov/page22.html

Contact: Ms. Laurette Tucker, USDA Rural Development, Culpeper Building, Suite 238, 1606 Santa Rosa Road, Richmond, VA 23229, (804) 287–1594.

Financial Resources . . .

Southside Virginia Southside Region Tobacco Capital Southside Region Tobacco Capital

Access Program (TCAP)Access Program (TCAP) A business located in the Southside Tobacco Region

makes application to a bank in Virginia participating in the Southside Region Tobacco Capital Access Program. http://www.dba.state.va.us/financing/programs/TCAP.asp

Financial Resources . . .

Virginia Tobacco Revitalization & Indemnification Commission http://www.vatobaccocommission.org/

SmallBusFinancing.htm Food-based business

VCE publication Starting a Food Processing Business in Virginia

http://www.ext.vt.edu/pubs/foods/348-963/348-963.html

Financial Resources . . .

Jonah Fogel, Ph.D.Community Viability SpecialistVirginia Cooperative Extension

804-527-4234jfogel@vt.edu