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PLAN AND TRACK YOUR
FINANCES
Finance Your Business
Pro Forma Financial Statements
Record Keeping for Businesses
FINANCE YOUR BUSINESS
Goals Estimate your startup costs and personal
net worth. Identify sources of equity capital for your
business. Identify sources of debt capital for your
business.
Slide 2
TERMS net worth debt-to-equity ratio equity capital venture capitalists debt capital collateral
Slide 3
WITH A PARTNER, MAKE AN ITEMIZED LIST OF START-UP COSTS.
Itemize startup costs. Determine the amount of capital
required to start your business.
Slide 4
ASSESS YOUR FINANCIAL NEEDS
PERSONAL FINANCIAL STATEMENT net worth =
assets ─ liabilities personal financial statement =
personal assets ─ personal liabilities
Slide 6
EQUITY CAPITAL debt-to-equity ratio
the relation between the dollars you have borrowed and the dollars you have invested in your business
The higher percentage of your own money that you have invested, the easier it will be for you to get others to invest.
Slide 9
the money invested in a business in return for a share in the profits of the business
Sources of equity include:Personal ContributionsFriends and RelativesVenture Capitalists
individuals or companies that make a living investing in startup companies
Slide 10
equity capital
DEBT CAPITAL debt capital
money loaned to a business with the understanding that the money will be repaid usually with interest
Friends and Relativesdetermine how the loan will affect your
relationshipprepare a formal agreement regarding
repayment terms
Slide 11
COMMERCIAL BANK LOANS secured loans
loans that are backed by collateral collateral
property that the borrower forfeits if he or she defaults on the loan
Slide 12
line of creditlong-term loanaccounts receivable financinginventory financing
Slide 13
Types of secured loans include the following:
loans that are not guaranteed with collateralonly made to creditworthy customers
Slide 14
unsecured loans
The business is a startup.A lack of:
a solid business plan adequate experience confidence in the borrower personal investment
Slide 15
Reasons a bank may not lend money include:
Small Business AdministrationSmall Business Investment CompaniesMinority Enterprise Small Business
Investment CompaniesDepartment of Housing and Urban
DevelopmentThe Economic Development
AdministrationState GovernmentsLocal and Municipal Governments
Slide 16
Other sources of loans include:
Slide 17
In an email to Mr. Farrar, answer the following questions. Make sure to use complete sentences.
1. Where can entrepreneurs look for debt financing?
2. What are some of the challenges you might encounter if you get equity financing from friends and/or family?
3. Why is a secured loan easier to get then an unsecured loan?
4. Why would a bank be more willing to grant an SBA-guaranteed loan to a new business owner?
Your Task