Joseph Fabiilli | Assess Your Financial Needs

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Assess Your Financial Needs

• Joseph Fabiilli

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Plan and Track Your Finances

• Finance Your Business
• Pro Forma Financial Statements
• Record Keeping for Businesses

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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.

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Terms

• net worth
• debt-to-equity ratio
• equity capital
• venture capitalists
• debt capital
• collateral

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With a partner, make an itemized list of start-up
costs.
Assess Your Financial Needs

• Itemize startup costs.
• Determine the amount of capital required to start
  your business.

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Personal Financial Statement

• net worth
• assets - liabilities
• personal financial statement
• personal assets - personal liabilities

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Why is the net worth of an entrepreneur important
to potential investors in the business?
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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.

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• equity capital

• the money invested in a business in return for a
  share in the profits of the business
• Sources of equity include
• Personal Contributions
• Friends and Relatives
• Venture Capitalists
• individuals or companies that make a living
  investing in startup companies

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Debt Capital

• debt capital
• money loaned to a business with the understanding
  that the money will be repaid
• usually with interest
• Friends and Relatives
• determine how the loan will affect your
  relationship
• prepare a formal agreement regarding repayment
  terms

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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

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• Types of secured loans include the following

• line of credit
• long-term loan
• accounts receivable financing
• inventory financing

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• unsecured loans

• loans that are not guaranteed with collateral
• only made to creditworthy customers

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• Reasons a bank may not lend money include

• The business is a startup.
• A lack of
• a solid business plan
• adequate experience
• confidence in the borrower
• personal investment

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• Other sources of loans include

• Small Business Administration
• Small Business Investment Companies
• Minority Enterprise Small Business Investment
  Companies
• Department of Housing and Urban Development
• The Economic Development Administration
• State Governments
• Local and Municipal Governments

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Your Task

• In an email to Mr. Farrar, answer the following
  questions. Make sure to use complete sentences.
• Where can entrepreneurs look for debt financing?
• What are some of the challenges you might
  encounter if you get equity financing from
  friends and/or family?
• Why is a secured loan easier to get then an
  unsecured loan?
• Why would a bank be more willing to grant an
  SBA-guaranteed loan to a new business owner?

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Thank you