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Financing A Business

Financing A Business. Presented By: Mary E. Stoick Assistant Vice President Business Banking Direct: (952) 858-4541 Mary.Stoick@HighlandBanks.com. Thought for the Day.

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Financing A Business

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  1. Financing A Business

    Presented By: Mary E. Stoick Assistant Vice President Business Banking Direct: (952) 858-4541 Mary.Stoick@HighlandBanks.com
  2. Thought for the Day “I believe it is my duty to make money and still more money; and to use the money I make for the good of my fellow men according to the dictates of my conscience.” John D. Rockefeller, Entrepreneur and Philanthropist
  3. Sources of Financing Equity Use own cash Investors (Angels, Venture Capital, Corporations, Mezzanine) Debt Family and friends Banks Alternative financiers (Leasing, Asset-based, city or community-based) Development Local State Federal
  4. Applying for a Business Loan Minimum information needed to provide bank: All businesses: 1. Formation documents Three years personal tax returns on all owners Current personal financial statement from all owners Start-ups: 1. Business plan 2. Projections – including P&L and balance sheet 3. Resumes of key principals and management team 4. Source of down payment/equity contribution Existing businesses: 1. Three years financial statements and tax returns 2. Interim financial statements, accounts receivable aging reports 3. Business debt schedule
  5. Banks are Lending!
  6. What Are Banks Looking For? 5 “C’s” of Credit: Character Capacity Capital Collateral Conditions
  7. How Much Debt Can a Business Qualify For? Cash Flow Primary source of repayment Cash flow to cover fixed charges at least 1.20x Collateral Secondary source of repayment Examples: Cash, Inventory, Accounts Receivable, Equipment, Real Estate Advance rates = 0-90%
  8. SBA Loans Microloan Express LOC 7(a) CAPLines 504 Import/Export
  9. Other Resources City of St Paul DPED: http://stpaul.gov/index.aspx?NID=2934 St. Paul Port Authority: www.sppa.com/financing-businesses/ City of Minneapolis CPED: www.ci.minneapolis.mn.us/cped/business_assistance.asp WomenVenture: www.womenventure.org MN Community Capital Fund: www.mncommunitycapitalfund.org Non-Profits Assistance Fund: www.nonprofitsassistancefund.org Neighborhood Development Corporation: www.ndc-mn.org Metropolitan Economic Development Association (MEDA): www.meda.net
  10. Principles & Practices Develop and maintain an open and communicative relationship with your Banker and accountant. Keep clean and organized books from Day 1. Look at and understand your financial statements. Reconcile on a timely basis (minimum = monthly). Use an accounting software system and upgrade regularly. Keep business and personal expenses separate. Budget.
  11. Why Do New Ventures Fail? Poor Sales (MAIN REASON) Small Markets Products/service does not fit buyers’ criteria/lack of customer understanding Cost of entry/start-up greater than planned No competitive edge to gain market share (product, execution, application and resource) Poor Management Beyond capabilities No controls Ego Poor Conditions Inadequate financing/resources
  12. Another Thought for the Day “Statistics and formulas are no substitute for judgment.” Henry Clay, U.S. Senator
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