StartUp Capital

1
Start-Up Capital

• Small Business Management Entrepreneurship
• AAEC/MGT 3454

2
How Much Will You Need?

• 1/3 need less than 10,000
• 1/4 need more than 50,000
• Depends on the business
• Consulting
• Restaurant or Vet Clinic
• Farm
• Part-time service
• Start-up budget

3
Start-up Budget

• Leasehold improvements
• Fixtures, installation, redecorating, etc.
• Machinery equipment
• Starting inventory
• Deposits for utilities
• Licenses, permits, legal fees
• Advertising expenses for opening
• Working capital (Cash)
• 3-6 months of business operating expenses
• 1 years salaries, fringes, taxes (owner
  employees)
• Other

4
Sources of Start-Up Capital

• Yourself (48)
• Friends Relatives (13)
• Watch out - Money strains relationships!
• Partners
• Limited or General or Stockholders
• Commercial Banks
• Typically not keen on proposed businesses
• Venture Capitalists
• Folks looking for a good investment
• Small Business Administration

5
Small Business Administration

• Must have been turned down by at least 1
  legitimate lender
• Loan Guarantees
• Up to 90
• Loan Participation
• Working hand-in-hand with a bank
• Loan proceeds from bank and SBA
• Loans
• Get entire loan from SBA

6
Preparing for the Lender

• Business Plan
• Usually required or highly recommended!
• At the very least
• Current Balance Sheet
• Business and personal
• Projected Cash Flow Statement
• They like to see 3-5 years of projections
• Projected Income Statement (PL)
• Projected Balance Sheets

7
Questions to Answer

• How will the money be used?
• How will it be repaid?
• What collateral will be used to secure the loan?
• What are you contributing () to the business?
• Lenders really want to see you buy in to the
  business!
• Do you and/or your key employees have the
  experience and knowledge necessary for your
  business?
• What are the key factors for success?
• How sensitive is your business to these factors
• Breakeven Analysis - lenders love it!!
• What are your contingency plans?

8
Working with Your Lender

• Search for a lender you can work with
• Knowledgeable, confidential, honest, open
• Go in prepared!
• Work WITH your lender
• Treat him/her like a partner
• Open communication is critical
• Talk with him/her before the problems start
• Dont hide during the bad times