Financing the Business

1
Financing the Business
2
Net Worth

• The difference between ones assets and
  liabilities is personal net worth

3
Assets

• Cash on hand
• Government securities
• Stocks and/or bonds
• Accounts and notes receivable
• Real estate
• Automobile
• Cash surrender value life insurance
• Other assets

4
Liabilities

• Notes payable to bank (auto)
• Notes payable to others
• Accounts and bills due
• Credit cards
• Real estate mortgage
• Other debts
• College loan

5
Available Cash

• Determine which assets can be turned into cash
• Money in checking or savings accounts
• Gifts from family and friends
• Loans from family or friends are liabilities and
  must be repaid with interest
• Cars, personal property and homes are not sources
  of readily available cash.

6
Debt Capital

• Sources
• Friends and relatives
• Borrowing against collateral
• Commercial Banks
• Traditional Loans
• Line of Credit
• Installment loans
• Mortgage loans
• Accounts Receivable or Inventory or Sales
  Contract financing
• Trade credit, Vendor Loans, Credit Cards
• Business Development Funds
• Small Business Administration

7
Equity Capital

• Money invested in the business by the owners
• Private investors
• Venture capitalists
• Investment banks
• Partnerships

8
Combine to Create a Financial Package
9
Start-up Costs

• Initial Inventory
• One-Time-Only Startup Cost

10
Financial Statements

• Pro forma financial statements
• Income statement shows the revenues and expenses
  over a specified period of time and the
  businesss profits.
• Balance sheet shows the worth, or value, of a
  business and allows investors to quickly assess
  the business liquidity.
• Cash Flow analysis projects financial activities
  month-by-month

11
Break-Even Analysis

• Break-even point is reached when all costs are
  met
• Fixed costs do not vary when there are changes in
  production or sales volume
• Variable costs fluctuate with changes in
  production or sales.
• After reaching the break-even point, all sales
  are profit