Standard Mkt MP 6 MKT-MP-6 Employ financial knowledge and skill to facilitate marketing decisions. ESSENTIAL QUESTION: HOW IS PERSONAL FINANCE SIMILAR/DIFFERENT.

Standard Mkt MP 6Standard Mkt MP 6MKT-MP-6Employ financial knowledge and skill to facilitate marketing decisions.

ESSENTIAL QUESTION:ESSENTIAL QUESTION:HOW IS PERSONAL FINANCE SIMILAR/DIFFERENT THAN THE HOW IS PERSONAL FINANCE SIMILAR/DIFFERENT THAN THE FINANCE USED IN THE BUSINESS WORLD?FINANCE USED IN THE BUSINESS WORLD?

Financing Your Business

Getting StartedGetting Started

Bootstrapping: Operating a business as Bootstrapping: Operating a business as frugally as possible and cutting all frugally as possible and cutting all unnecessary expenses. unnecessary expenses.

Start-up MoneyStart-up Money

Equity Financing:Equity Financing:

Cash raised for a business in exchange Cash raised for a business in exchange for an ownership stakefor an ownership stake in the business in the business

Debt Financing:Debt Financing:

Financing with loans that must be paid Financing with loans that must be paid back with interestback with interest

Sources of Equity Capital/FinancingSources of Equity Capital/Financing

Personal SavingsPersonal Savings

Friends & FamilyFriends & Family

Private investors (Angels)Private investors (Angels)

PartnersPartners

Venture Capitalists Venture Capitalists

Sources of Debt Capital/FinancingSources of Debt Capital/Financing

BankBank

Trade Credit: credit one business grants to Trade Credit: credit one business grants to anotheranother

SBA LoanSBA Loan Commercial Finance CompaniesCommercial Finance Companies

Minority Enterprise Dev. Programs: owners must Minority Enterprise Dev. Programs: owners must be at least 51% minority, female, or disabled be at least 51% minority, female, or disabled

What Bankers ExpectWhat Bankers Expect

FIVE C’s FIVE C’s

1.1. Character:Character:A.A. The The borrower’s reputation for fair and borrower’s reputation for fair and

ethical businessethical business

B.B. Business experienceBusiness experience

C.C. Management team Management team

What Bankers ExpectWhat Bankers Expect

FIVE C’s FIVE C’s

2.2. Capacity:Capacity:A.A. The The ability for the business to pay the ability for the business to pay the

loanloan

3.3. Capital:Capital:A.A. The The net worth of a businessnet worth of a business

What Bankers ExpectWhat Bankers Expect

FIVE C’s FIVE C’s 4.4. Collateral:Collateral:

A.A. Valuable Valuable assets a bank can claim if the loan is assets a bank can claim if the loan is not paid backnot paid back

5.5. Conditions:Conditions:A.A. Potential for growthPotential for growthB.B. Amount of competitionAmount of competitionC.C. LocationLocationD.D. Form of ownershipForm of ownership

Start-Up CostsStart-Up Costs

The costs a business incurs before a business opens.The costs a business incurs before a business opens.

Determining Start-Up CostsDetermining Start-Up Costs

You need to talk to:You need to talk to:

SuppliersSuppliers VendorsVendors ManufacturersManufacturers DistributorsDistributors Other businesses in your industryOther businesses in your industry

Start-Up CostsStart-Up CostsRentRent

Security depositSecurity deposit

EquipmentEquipment Furniture, Fixtures, Phones, Computers, Counters, etc.Furniture, Fixtures, Phones, Computers, Counters, etc.

Fees and LicensesFees and Licenses Permits, Licenses, Legal FeesPermits, Licenses, Legal Fees

Promotion ExpensesPromotion Expenses Business, Cards, Brochures, Forms, Business, Cards, Brochures, Forms,

Contingency (emergency money)Contingency (emergency money)