advice from cpas
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Securing Your Business Financing. Advice from CPAs. Bank loans are the most common source of financial support Explore alternative funding options Your CPA can help!. Lending 101. Debt Financing Most straightforward Interest payments and repayments due within a specific time - PowerPoint PPT PresentationTRANSCRIPT
Advice from CPAs
Securing YourBusiness Financing
Lending 101
• Bank loans are the most common
source of financial support• Explore alternative funding options• Your CPA can help!
Types of Financing
• Debt Financing– Most straightforward
– Interest payments and repayments
due within a specific time
– A standard bank loan
Types of Financing
• Equity Financing– Raise capital by selling interest to investors
– No guaranteed return
– Investors share in company’s wealth
– May also insist on sharing management and control
Financing Options
• Which financing option is best for you?• Ask yourself:
– Do you want total control of your business?– Do you want to leave a legacy?– Eventually, do you want to sell your business?
Key Sources of Funding
• Financial Institutions include:– Commercial banks – focus on the needs of small
businesses– Community banks – accommodate both individual
and commercial customers– Credit Unions – support vision of their members
Key Sources of Funding
• Customer or Supplier– Provides discounts for up-front payments– Generates cash for your business
• Factoring or Accounts Receivable– Immediate funding– Factoring agreement can be complicated
Key Sources of Funding• Working Capital
– Similar to a line of credit– Tied to company’s receivables
• Economic Development Groups– Offered through federal, state and local
governments• Friends and Family
– Treat it as a business contract– Create a written agreement to avoid
misunderstandings
A Brief Overview of Equity Financing
• Initial Public Offering (IPO)– Common route for selling stock
• Private Placement– Less complex because investors are pre-selected
• Private Investors– “Angels” take an equity stake in your company
Two Rules of Thumb
• Your company MUST be seen as a good risk:– Be prepared– Have a business plan
• Your CPA can help you identify your goals
Questions and Answers
• Why do you need financing?– Apply for capital with a specific purpose
• Is it urgent, short-term or long-term and how much do you need?– Be specific and detailed
Questions and Answers
• Do I have a realistic plan to generate funds to repay debt? – Present it as a recoverable risk
• How strong is your management team and support staff?– Identify your strengths and weaknesses in advance
An Effective Business Plan
• Executive summary• Explanation and operation of business• Description and qualifications of management• Financial data • Miscellaneous attachments for details
A Few More Tips
• ALWAYS be honest about your financial situation
• Be prepared to discuss any business problems you encountered in the past
• Offer preventative measures• Your candor counts• Work closely with a CPA
Review
• Define your goals• Prepare your business for scrutiny• Demonstrate your company is a good risk• Prepare for questions and answers• Consult with your CPA to determine which
options are best for you
Thank you and good luck!