Who

Transcription

1 Financing Made Easy

2 Who Director of the Center for Workforce Development at Columbus State Community College District Center Manager for Ohio SBDC at Columbus State SBDC State Star for Ohio in 2007 Won the SBA Innovation and Service Center of the Year for Ohio and SBA Region Five in 2007

3 Ohio SBDC at Columbus State An experienced & award winning team providing nocost, one-on-one business management advice with four centers to serve you at one location: Small Business Development Center SBDC Manufacturing Center SBDC International Business Center SBDC Latino Center

4 Finding Money for Your Business

5 David Rivers ~ Ohio SBDC at Columbus State Deanna Barzak ~ Telhio Credit Union Jason Wells ~ US Bank

6 It s All About Customers

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8 Friends, Family, Founder Bootstrapping is building the business from internally generated funds. You need to establish a foundation for your business. Build equity Build credibility and show that your business has customers and a product that people want to buy. Focus on customers and cash flow. Work hard and be creative in seeking ways to drive revenue while holding expenses down.

9 Grants Grants are: Funds that flow from government agencies to non-profit firms to provide a specific public service. Grants are not: Free Money Money to live on while you figure out what to do Reserves in case things don t work out. 9

10 Investors The underlying reason that they will invest is return on their investment. They invest in spaces they know. They invest with people they know They invest based on referrals from people they know. Invest based on due diligence. Will require professional terms. Looking for a big payout based on a liquidity event. 10

11 Strategic Investors More interested in the product than the business. Invest based on gut reaction. May take common stock May not look for a liquidity event. May be the friends in FFF (or referred by FFF) 11

12 Key Points About Investors If you take someone else s money you have a partner. They will want to have some influence on the company to protect their investment. You will probably have to relinquish some level of control over the company. If you are unwilling to share leadership of the company, investors are not the option for you. 12

13 Banks Banks are in business to make money not to make loans. Lending is a tool to making money.

14 Commercial Banks Banks typically lend for stuff. Banks are a great option if you have history and are looking to expand. However, for an early stage company with limited history and minimal collateral, getting a loan could prove difficult.

15 Small Business Administration SBA is not in the business of making bad loans. Once the bank has agreed that the loan is good but in some way outside their guidelines they will seek an SBA guarantee. The SBA is there to help you with your cash flow. Longer term Lower down payment

16 What do banks look for? Credit History and Score Business Plan Collateral

17 Getting the bank to say YES! Know your credit score going in. Establish a banking relationship Keep you plan tight, clear and easy to understand. Use common format, don t be creative. Help the banker say yes. Put yourself in the banker s shoes. Structure your ask. Separate working capital, equipment and real estate.

18 Creative Financing options

19 Peer To Peer Lending These are direct loans between a business and investors. They are typically facilitated by a third party intermediary that collects information on loan amount, purpose, the credit and business strength (financial statements, bank accounts, etc.). Investors are able to look at the opportunities and select what they are interested in funding. What attracts investors to participate is return. Typically rates will be above 10% depending on the strength of the borrower.

20 Factoring ~ Accounts Receivable Financing Business sells its accounts receivables/invoices to a third party at a discount. The "Factor" provides a cash advance, often 70-85% of the value of the accounts. When the customer pays the bill the check is typically sent to Lock Box in the name of the business and the factor. Upon collection of the receivable the factor takes their principle and their accumulated fee with the remainder going to the business. The fee is typically based on a percentage rate to be paid to the factor based on the number of days the receivable is outstanding. This can get expensive if the receivable drags on and is not paid in a timely manner. With factoring the strength of the vendor paying the invoice is just as important as the strength of you as the business owner (actually the strength of the vendor is probably more important).

21 Merchant Financing If you are accepting of credit cards in the course of your business this may work for you. You need to be able to show your historic card activity and that you have a reoccurring volume of credit card purchases to secure cash advances from your merchant services provider. You are getting a loan based on what you have done in credit cards in the past. Repayment/fee is deducted from your merchant account as you do business and generate credit card sales.

22 Vendor Financing Sometimes what you deliver is so important to your customers that they will help finance your growth capital needs. Look at who your customers are and if they may be willing to fund some of your working capital needs. When preparing to approach your customers for funding you need to consider if they are strong enough financially and have a strong cash position that will enable them to provide support. In the ask you should connect how your business growth will help their business grow.

23 CrowdFunding Crowdfunding is exactly what the name implies: Raising small chunks of capital raised from a large number of people that will eventually total to the amount you need. This type of funding is a numbers game. You need to reach a large number of prospective funders so it is well suited to use social networking and internet funding portals like Kickstarter, Indiegogo and Fundable. Currently, crowdfunding is based on a rewards model where if someone contributes they get a reward such as a t-shirt or an early release of the product instead of repayment. Eventually you will be able to seek investors and sell equity on crowdfunding sites.

24 Final Thoughts (Almost Done)

25 Don t Go It Alone Use the resources that are available to you. Get a coach, an advisor or just hangout at the SBDC but don t think you have to figure this out by yourself.

26 Everything is always impossible before it works. That is what entrepreneurs are all about doing what people have told them is impossible.

27 Where Am I mbowers3@cscc.edu Ohio SBDC Blog Twitter Facebook Google + Pinterest LinkedIn

28 For Information on SBDC Activities Ohio SBDC at Columbus State