advice from cpas
Post on 25-Feb-2016
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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!
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