Tips for how to access capital for small businesses can

1. Accessing Capital
Gener8! Business Ready in 8 Weeks

2. Before Seeking Capital
Note: Existing Businesses will most likely need to show they are
profitable or have collateral to secure loans
Accessing Capital 2
• One-time charges
• Recurring costs
• Hidden costs & contingencies
Determine your start up costs
• What’s your “Skin in the Game”
Determine your personal equity
• Ensure you have included all items and contingencies
Estimate monthly expenses

3. What is the Anticipated Revenue?
• Determine what you expect your annual
sales to be in year one by:
– How much traffic do you anticipate monthly?
– How much will be spent on average by each
customer?
– What will it cost for you to serve that customer?
– Cost of goods sold (inventory, shipping,
marketing, etc.)
3Accessing Capital

4. Various Sources For Accessing Financing
– Personal savings/Individual assets
– Current Sales and/or income
– Bank/Credit Union small biz loans and SBA loan
guarantees
– Micro lenders
– Existing credit lines
– Refinancing debt
– Retirement accounts
– Investor(s) and/or partners
– Family and friends
– Grants
– Vendor Financing
– Credit cards (not recommended)
4Accessing Capital

5. Debt Financing
• Is borrowed money which the
entrepreneur must pay back to the
lending institution
• Typically for well-established businesses
• Requires good credit history (borrower)
• Obtained through credit unions and/or
banks
5Accessing Capital

6. Advantages & Disadvantages of Debt Financing
6Accessing Capital
Advantages
• Owner maintains
control
• No obligation to lender
aside from repayment
• Interest is tax
deductible
• Repayment terms are
fixed
Disadvantages
• Requires regular
monthly payments w/
accruing interest
• Can tarnish credit and
limit raising additional
capital
• Mostly limited to
businesses with solid
track records

7. Equity Financing
7Accessing Capital
• Is borrowed money given in exchange for
ownership in business
• Used primarily by startups, new
businesses and those with poor credit
ratings
• Obtained using:
– Personal funds (savings, retirement, etc.)
– Friends/Family
– Investors/Venture capitalists/banking firms
– Large corporations

8. Advantages & Disadvantages Of Equity Financing
8Accessing Capital
Advantages
• Owner obtains funds
without incurring debt
(more cash flow)
• Owners focus on making
products profitable
• Can develop long term
relationships
• Ability to invest more
than towards debt
• Friends and family can be
a quick way to capital
Disadvantages
• Dilution of ownership
• Investors may feel
inclined to have a say
• Strain may occur with
family and friends
• Personal finances may be
maxed
• Reporting is often
required by investors

9. Know Your Personal Credit
• Your personal credit will impact your
ability to secure loans
• Review your most recent credit profile
– www.annualcreditreport.com
9Accessing Capital

10. Securing Loans Through a Credit Union/Bank
• Most require you to produce at least
10% in cash needed for start-up
• Commonly referred to as your “owner
equity/investment” or “your skin in the
game”
– Do you have this money?
– Some but not all?
– No money to invest?
10Accessing Capital

11. Other Considerations For Financing
11Accessing Capital
• Ability to repay loan
• Ensure a diverse revenue sources
and/or customer base
• Insurance to protect your business
• Incorporating for protection and tax
purposes
• Trigger points and other safeguards
• Contingencies

12. Get Connected & Learn More
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Email: smallbiz@mygenfcu.org
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business tips to help you reach your money goals