Advice from CPAs

1
Securing Your Business Financing
Advice from CPAs
2
Lending 101

• Bank loans are the most common
• source of financial support
• Explore alternative funding options
• Your CPA can help!

3
Types of Financing

• Debt Financing
• Most straightforward
• Interest payments and repayments
• due within a specific time
• A standard bank loan

4
Types of Financing

• Equity Financing
• Raise capital by selling interest to investors
• No guaranteed return
• Investors share in companys wealth
• May also insist on sharing management and control

5
Financing Options

• Which financing option is best for you?
• Ask yourself
• Do you want total control of your business?
• Do you want to leave a legacy?
• Eventually, do you want to sell your business?

6
Key Sources of Funding

• Financial Institutions include
• Commercial banks focus on the needs of small
  businesses
• Community banks accommodate both individual and
  commercial customers
• Credit Unions support vision of their members

7
Key Sources of Funding

• Customer or Supplier
• Provides discounts for up-front payments
• Generates cash for your business
• Factoring or Accounts Receivable
• Immediate funding
• Factoring agreement can be complicated

8
Key Sources of Funding

• Working Capital
• Similar to a line of credit
• Tied to companys receivables
• Economic Development Groups
• Offered through federal, state and local
  governments
• Friends and Family
• Treat it as a business contract
• Create a written agreement to avoid
  misunderstandings

9
A Brief Overview of Equity Financing

• Initial Public Offering (IPO)
• Common route for selling stock
• Private Placement
• Less complex because investors are pre-selected
• Private Investors
• Angels take an equity stake in your company

10
Two Rules of Thumb

• Your company MUST be seen as a good risk
• Be prepared
• Have a business plan
• Your CPA can help you identify your goals

11
Questions and Answers

• Why do you need financing?
• Apply for capital with a specific purpose
• Is it urgent, short-term or long-term and how
  much do you need?
• Be specific and detailed

12
Questions and Answers

• Do I have a realistic plan to generate funds to
  repay debt?
• Present it as a recoverable risk
• How strong is your management team and support
  staff?
• Identify your strengths and weaknesses in advance

13
An Effective Business Plan

• Executive summary
• Explanation and operation of business
• Description and qualifications of management
• Financial data
• Miscellaneous attachments for details

14
A Few More Tips

• ALWAYS be honest about your financial situation
• Be prepared to discuss any business problems you
  encountered in the past
• Offer preventative measures
• Your candor counts
• Work closely with a CPA

15
Review

• Define your goals
• Prepare your business for scrutiny
• Demonstrate your company is a good risk
• Prepare for questions and answers
• Consult with your CPA to determine which options
  are best for you

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• Thank you and good luck!