financing a business presented by: mary e. stoick assistant vice president business banking direct:...
TRANSCRIPT
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Financing A BusinessPresented By:Mary E. Stoick
Assistant Vice PresidentBusiness Banking
Direct: (952) [email protected]
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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
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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
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Applying for a Business Loan
Minimum information needed to provide bank:• All businesses:
1. Formation documents2. Three years personal tax returns on all owners 3. Current personal financial statement from all owners
• Start-ups:1. Business plan2. Projections – including P&L and balance sheet3. Resumes of key principals and management team4. Source of down payment/equity contribution
• Existing businesses:1. Three years financial statements and tax returns2. Interim financial statements, accounts receivable aging reports3. Business debt schedule
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Banks are Lending!
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What Are Banks Looking For?
5 “C’s” of Credit:• Character
• Capacity
• Capital
• Collateral
• Conditions
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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%
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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
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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.
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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
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Another Thought for the Day
“Statistics and formulas are no substitute for judgment.”
Henry Clay, U.S. Senator