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Simple Steps for Starting Your Business
Module 5: Funding Sources
Simple Steps for
Starting Your Business
Module 5: Funding Sources
Simple Steps for Starting Your Business
Module 5: Funding SourcesSimple Steps Modules
One-on-One Mentoring
Session 1:
Startup
Basics
Session 2:
Business
Concept
Session 3:
Marketing
Plan
Session 4:
Financial
Projections
Mentoring/Build
Business Plan “Go or No-go” decision &
next steps with mentor
Session 5:
Funding
Sources
Simple Steps for Starting Your Business
Module 5: Funding Sources
• How did you do?
• Any questions on your draft financial
projections worksheets.
• Any issues obtaining your Risk Management Association (RMA) ratio data?
• Any questions?
Homework
Simple Steps for Starting Your Business
Module 5: Funding Sources
• Financial statement analysis
• Accounting and bookkeeping systems
• Sources of capital (traditional and non-
traditional)
• The “six C’s of credit”
• Banking relations
• Go/No-Go decision
• Next steps
Agenda
Simple Steps for Starting Your Business
Module 5: Funding Sources
• Monthly preparation and review of
financial statements (within 10 days
after the close of the month)
• Ratio analysis
• Current ratio, accounts receivable
and payable analysis
• Comparative benchmark analysis
Financial Statement Analysis
Simple Steps for Starting Your Business
Module 5: Funding Sources
• Choosing-manual vs. computerized
– www.techradar.com/news/software/applications/
best-free-accounting-software-8-programs-we-
recommend-1136684
www.businessnewsdaily.com/7545-best-free-
accounting-software.html
www.businessnewsdaily.com/7543-best-
accounting-software.html
• Hiring a bookkeeper vs. DIY
• Train and educate yourself in accounting and
understanding financial statements
– https://www.sba.gov/course/introduction-accounting/
• Working with your accountant
Accounting & Record Keeping
Simple Steps for Starting Your Business
Module 5: Funding Sources
• Preparation is essential
• Lenders want facts, research and accurate
projections
• Whether you seek funding now or in the
future, your records should be in order
Record Keeping and Financing
Simple Steps for Starting Your Business
Module 5: Funding SourcesClient Resource Guide
The SCORE St. Paul Client Resource Guide has a number of funding related tools and resources:
SCORE St. Paul Client Resource Guide
Simple Steps for Starting Your Business
Module 5: Funding Sources
• Bank or credit union
financing
• Credit cards
• Partners
• Sale of capital stock
• Government Grants
• Owner’s equity
investment
• Savings, investments,
insurance cash
surrender value
• Friends & family
• Home equity loan
Sources of Capital: Traditional
Simple Steps for Starting Your Business
Module 5: Funding Sources
• SBA guaranteed loans through banks, CDCs
• Microloans
• Mn- Dept. of Community & Economic Dev.
• Wisconsin Economic Dev. Corp- inwisconsin.com
• Regional Business Fund rbfinc.org/programs.html
• USDA Rural Development: Guaranteed Business & Industry; REDLG;
Microloans; Revolving loan Funds
• Crowdfunding
• Angel Investors
• Venture Capital
• Factoring
Sources of Capital:
Special and Non-traditional
Simple Steps for Starting Your Business
Module 5: Funding Sources
• SBA guaranteed loans: www.sba.gov
– https://www.sba.gov/business-guide/plan-your-
business/fund-your-business
– SBA 7(a) up to $5 million; Interest rate – Prime + up to
2.75%
– SBA Express up to $350,000 ; Prime plus Up to 6.5%
depending on loan size
– Community Advantage- Prime+up to 6%
– Find a Lender-Your local bank/credit union or use SBA
Lender match at : www.sba.gov/funding-
programs/loans/lender-match
• SBA Fixed Asset Financing program- 504
– Provides financing of land, building and equipment for 10 to 25 years at a
fixed rate for 30-40% of the project needs in partnerhsip with a loan from
from your normal lender
– 504 lenders: 504 Corp; Minnesota Business Finance Corporation; Spedco;
TCM Certified Development Co.; WBD
Sources of Capital: Special and
Non-traditional l
Simple Steps for Starting Your Business
Module 5: Funding SourcesSources of Capital
• SBA microloans
– Generally not to exceed $50,000 & not able to get bank financing
• Lenders
– African Development Center
• www.adcminnesota.org
• 612-333-4772
– Hmong American Partnership
• www.hmong.org
• 651-495-1557
– Neighborhood Development Center
• www.ndc-mn.org
• 651-291-2480
– WomenVenture
• www.Womenventure.org
• 612-224-9540
12
Simple Steps for Starting Your Business
Module 5: Funding SourcesSources of Capital
• Minnesota DEED financing programs
http://mn.gov/deed/business/financing-business/deed-programs/
• Wisconsin- Inwisconsinhttp://inwisconsin.com/entrepreneurs/assistance/capital-catalyst
• Regional Business Fund for Wisconsin businesses – www.rbfinc.org
– Revolving Loan Fund
– Microloan Fund
– Growth Loan Fund
– Façade Loan Fund
– Technology Enterprise Fund
– EDA Revolving LoanFund
• Federal Government Grants: www.grants.gov
13
Simple Steps for Starting Your Business
Module 5: Funding SourcesCrowdfunding
• What is Crowdfunding?
• CROWDFUND Act and JOBS Act
• Traditional Financing vs. Crowdfunding
Sources:
nlcfa.org
startupexemption.com
opportunity.org
Simple Steps for Starting Your Business
Module 5: Funding SourcesTypes of Crowdfunding
Microfinance Credit-based Rewards-Based
Crowdfunding
Equity
Crowdfunding
Types of
Projects
Financial
services for
people with
limited access to
bank services
Nearly any
purpose from
business
investment to
paying down
debt
Often creative in
nature.
Could also be
business of
philanthropy, i.e.
funds raised to
support a cause.
Investment
Rewards None Financial
(interest)
Something related to
the project or cause
Financial
(appreciation or
interest)
Sources:
nlcfa.org
startupexemption.com
opportunity.org
sba.gov
crowdraiser.com
businessnewsdaily.com
Simple Steps for Starting Your Business
Module 5: Funding SourcesCrowdfunding Platforms
Microfinance Credit-based Rewards-Based
Crowdfunding
Equity Crowdfunding
Kiva.org
Accionusa.org
Prosper.com
SoMoLend.com
Lendingclub.com
Kickstarter.com
Indiegogo.com
Fundable.com
Wefunder.com
Relayfund.com
Simple Steps for Starting Your Business
Module 5: Funding SourcesAngels, Venture Capital
and Factoring
• Angel Investors is an affluent individual who provides capital
for a business start-up, usually in exchange for convertible
debt or ownership equity. A small but increasing number of angel
investors invest online through equity crowdfunding or organize
themselves into angel groups or angel networks to
share investment capital, as well as to provide advice to their
portfolio companies
• Venture Capital- is a type of private equity,[1] a form
of financing that is provided by firms or funds to small, early-stage,
emerging firms that are deemed to have high growth potential, or
which have demonstrated high growth
• Factoring-discounted purchase of your receivables
Simple Steps for Starting Your Business
Module 5: Funding Sources
Lenders and banks look for:
• Good credit
• Management expertise and
commitment
• Feasible business plan
• Adequate owner equity
• Sufficient collateral
The Loan Application
Simple Steps for Starting Your Business
Module 5: Funding Sources
• Character
• Capacity
• Collateral
• Capital
• Conditions
• Cash Flow
6 C’s of Credit
Simple Steps for Starting Your Business
Module 5: Funding Sources
• Trustworthiness
• Personal and business credit history
• Integrity
• Quality of references
• Experience in the business
• Impression you make on the lender or
investor
Character
Simple Steps for Starting Your Business
Module 5: Funding Sources
• Is your company able to repay the
amount borrowed?
• How soon can you generate positive
cash flow?
• When will you show a profit?
• How large will the profit be?
• Can the profit be sustained?
Capacity
Simple Steps for Starting Your Business
Module 5: Funding Sources
• The money you have personally
invested
• Your ability to save money and
accumulate growth in owner’s equity
Capital
Simple Steps for Starting Your Business
Module 5: Funding Sources
Additional Forms of Security:
• Secondary source of repayment
• Third party guarantee
• Tangible assets
• Property
• Equipment
• Accounts receivable
• Inventory
Collateral
Simple Steps for Starting Your Business
Module 5: Funding Sources
• Terms of loan:
– Intended purpose of loan
– How much is requested
– Length of loan
• Local economic climate of industry
• Local economic climate of business
Conditions
Simple Steps for Starting Your Business
Module 5: Funding Sources
• Where is the money coming from to
repay the debt obligation?
• Where will all the money go?
• How much of a “cushion” should I
keep?
Cash Flow
Simple Steps for Starting Your Business
Module 5: Funding Sources
• A FICO score of 700 or greater is
desirable
• Your personal credit report available
for free from:
www.annualcreditreport.com
Credit Reports
Simple Steps for Starting Your Business
Module 5: Funding Sources
• Collateral (both business
and personal)
• Personal tax returns (3 yrs)
• Personal financial
statements
• Resumé
What You Need:
• Cover letter introduction
• Summary of financial needs
• Financial statements (3 yrs)
• Business tax returns (3 yrs)
• Projected cash flow statement
(12 months)
Your credit score will drop by about 5 points with each application – find out if the
bank will do business with you before you apply. One application may be enough!
Bank Loan Application
Simple Steps for Starting Your Business
Module 5: Funding Sources
Additional Questions:
• Any legal claims, liens or judgments?
• Are any assets pledged?
• Tax returns and payment
up-to-date?
• Life insurance (face value, cash value)?
• Monthly household income?
• Monthly household expenses?
Bank Loan Application
Simple Steps for Starting Your Business
Module 5: Funding Sources
• Leases
• Inventory
• Equipment
• Chattel Mortgages
• Accounts Receivable
• Plant Improvement Loans
• Conditional Sales Contract
Financing from Balance Sheet
Simple Steps for Starting Your Business
Module 5: Funding Sources
Getting Your Foot in the Door
• Know your financial SWOT
– Strengths
– Weaknesses
– Opportunities
– Threats
• Use your “strengths” for your:
– elevator speech
– abbreviated presentation
Face-to-Face Meeting
Simple Steps for Starting Your Business
Module 5: Funding Sources
• Financial statement analysis
• Accounting and bookkeeping systems
• The “six C’s of credit”
• Banking relations
• Sources of capital (traditional and
non-traditional)
• Go/No-Go decision
• Next steps
Review
Simple Steps for Starting Your Business
Module 5: Funding Sources
Total score should not be more than 10. Assign more points to indicate agreement, less if you do not agree.
Topic Question Points
Idea Feasibility
My product/service is servicing an unmet need.
My product/service could be expanded to gain additional customer groups.
Market Identification I know who my potential buyers are.
I have a clear value proposition for my potential buyers.
Implementation I know what it will take to start my business.
I know what it will take to run my business.
Funding I understand what it will take to obtain funding.
I have a plan to fund my business start.
Personal Readiness I am ready to work hard to achieve my business goals.
I understand the challenges ahead and have a plan to tackle them.
Total Points:
Readiness Self-Assessment
Simple Steps for Starting Your Business
Module 5: Funding Sources
Congratulations! You’ve completed the
Simple Steps for Starting Your Business Series!
Simple Steps Series
One-on-One Mentoring
Session 1:
Startup
Basics
Session 2:
Business
Concept
Session 3:
Marketing
Plan
Session 4:
Financial
Projections
Mentoring/Build
Business Plan
“Go or No-go” decision & next
steps with mentor
Session 5:
Funding
Sources
Simple Steps for Starting Your Business
Module 5: Funding SourcesModules & Core Resources
Module 1 – Startup Basics:
https://stpaul.score.org/event/simple-steps-starting-
your-business-module-1-startup-basics
Module 2 – Defining Your Business Concept:
https://stpaul.score.org/event/simple-steps-starting-
your-business-module-2-defining-your-business-concept
Module 3 – Developing Your Marketing Plan:
https://stpaul.score.org/event/simple-steps-starting-
your-business-module-3-creating-your-marketing-plan
Module 4 – Financial Projections
https://stpaul.score.org/event/simple-steps-starting-
your-business-module-4-financial-projections
Module 5 – Funding Resources:
https://stpaul.score.org/event/simple-steps-starting-
your-business-module-5-funding-sources
Simple Steps Course Materials:
https://www.score.org/simple-steps-starting-your-
business-course-materials
Simple Steps Workbook:
https://s3.amazonaws.com/mentoring.redesign/s3fs-
public/SCORE-Canon-Simple-Steps-Starting-Business-
2014_1.pdf
Simple Steps for Starting Your Business
Module 5: Funding SourcesSession 5 Resources
Page 35
Simple Steps for Starting Your Business
Module 5: Funding Sources
Set up a meeting with your SCORE mentor,
we can help you with:
– Further research on your idea
– Completing your feasibility plan
– Finalizing your financial forecast
– Assist in development of your business plan
– Preparing your loan package
– Launching your business
– Growing your business
Help us to help others by completing an
evaluation.
Contact
SCORE
Next Steps
Simple Steps for Starting Your Business
Module 5: Funding Sources
Thank you
We wish you success
and look forward to
continuing our work
together!
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