Business Environment, Innovation & Entrepreneurship

Business Environment, Innovation & Entrepreneurship

MBA-515-21393

Module 12: Funding your Business

 

Bruce Crochetiere

 

Module 12: Funding your Business

 

Discuss Short Paper 2

Funding you Business

Assignment 7

Building your Business Plan

 

 

 

 

 

Financial Pro-Forma Statement

(Technology Business Example)

 

 

Financial Pro-Forma Statement (Example)

 

 

Year 1 $675,000 cash needed; Year 2 $468,750 (SO HOW DO I FUND $1,143,750 OVER THE FIRST 2 YEARS)

It is important to understand what cash you need and set that up with the different funding options.

Number 1 Reason why companies go out of business (Underfunded)

Funding your Business

 

Banks

 

 

Friends and Family

 

 

SBA Loan

 

 

Angel Funding

 

 

Venture Capital

 

 

Funding – Banks

 

Interview 3 Banks

 

 

Look for a Bank that will work with you – Smaller Banks

 

 

Develop a Close Relationship

 

 

Personal Guarantee

 

 

Looking for a Revolving Credit Line (Banks need Collateral)

 

 

Personal Savings

 

 

Home Equity

 

 

So if your assets are $100,000 that’s all your going to get from the bank for a revolving credit line

 

 

Revolving credit line is a monthly line that you have to repay

 

 

As your business grows banks will lend you more than your personal assets

 

 

Bank Application

Bank Application

Funding – Friends and Family

 

Not the best option – Risk is losing friendships

 

 

Easiest way to get Collateral

 

 

Gifts (0% Payback, Tax free)

 

 

Loans (2.5 – 5.4%)

 

 

Equity (Own part of your business)

 

 

Need a legal document

 

 

Generally $5,000 to $25,000

 

 

Funding – SBA Loan

 

https://www.sba.gov/funding-programs

 

 

Get $500 to $5.5 million to fund your business

 

 

Rates between 7.5 and 9.5%

 

 

Done through lending partners (Banks will match)

 

 

Requirements:

 

 

Be a for-profit business (Operate Legally)

 

 

Do business in the U.S.

 

 

Have invested equity

 

 

Exhaust financing options

 

 

Funding – Angel

 

Diverse group of individuals who have amassed their wealth, they like to help you grow (Mentoring)

 

 

Angel Investment Network https://www.angelinvestmentnetwork.us

 

 

Sweet spot $150,000 to $1.5 Million

 

 

Equity stake or a loan

 

 

Usually do not get involved in decision making

 

 

Generally 10 -20% payback

 

 

Funding – Venture Capital

 

High-risk/high-return opportunities

 

 

$5,000,000 to Billions

 

 

Venture Capital get’s Equity (20% + payback, plus fee’s)

 

 

They have say-so in management decisions, Board of Directors

 

 

Epic Games $1.25 Billion

 

 

KKR, ICONIQ Capital, Smash Ventures, aXiomatic, Vulcan Capital, Kleiner Perkins, and Lightspeed Venture Partners

 

 

https://www.kkr.com/

 

 

Home

 

 

Funding Categories

 

$0 – Whatever your personal assets are (Banks) Low Interest

 

 

$5,000 – $25,000 (Friends and Family) Low Interest; Risk Losing Relationships

 

 

$500 to $5.5 million (SBA Loan) Moderate interest; Very Secure

 

 

$150,000 to $1.5 Million (Angel Funding) High Interest; Low Risk

 

 

$5,000,000 to Billions (Venture Funding) High Interest; High Riisk

 

 

 

Assignment 7: Funding your Business Shark Tank

 

 

Due April 13

1 to 2 page on how you are going to fund your business

References

 

Building your Business Plan – Final Paper

 

Executive summary

 

 

Company description – Milestone 1

 

 

Market analysis

 

 

Organization structure – Milestone 2

 

 

Description of the service or product line

 

 

Marketing strategy – Milestone 3

 

 

Financial projections

 

 

Funding your business – Milestone 4

 

 

Summary

 

 

Appendix that includes relevant articles, resumes, or permits.

 

 

Filling out an application for establishing a NH Corporation

 

 

 

 

Be Well and Stay Safe!

 

 

This soon will pass!

 

 

Year12345

Product Sales4,000,000$ 5,000,000$ 7,500,000$ 9,375,000$ 11,718,750$

Profssional Services500,000$ 625,000$ 781,250$ 976,563$ 1,220,703$

Managed Services100,000$ 125,000$ 156,250$ 195,313$ 244,141$

Rebates50,000$ 62,500$ 78,125$ 97,656$ 122,070$

MDF25,000$ 31,250$ 39,063$ 48,828$ 61,035$

Total Revenue4,675,000$ 5,843,750$ 8,554,688$ 10,693,359$ 13,366,699$

Cost of Goods Sold3,400,000$ 4,250,000$ 5,312,500$ 6,640,625$ 8,300,781$

Gross Profit1,275,000$ 1,593,750$ 3,242,188$ 4,052,734$ 5,065,918$

Overhead

Admin/Exec450,000$ 562,500$ 703,125$ 878,906$ 1,098,633$

Engineering300,000$ 375,000$ 468,750$ 585,938$ 732,422$

Man Services250,000$ 312,500$ 390,625$ 488,281$ 610,352$

Sales300,000$ 375,000$ 468,750$ 585,938$ 732,422$

Sales Support150,000$ 187,500$ 234,375$ 292,969$ 366,211$

Total Overhead1,450,000$ 1,812,500$ 2,265,625$ 2,832,031$ 3,540,039$

Operatng EBITDA(175,000)$ (218,750)$ 976,563$ 1,220,703$ 1,525,879$

Capital Expenditures(500,000)$ (250,000)$ (100,000)$ (100,000)$ (100,000)$

Cash Needed(675,000)$ (468,750)$ 876,563$ 1,120,703$ 1,425,879$

PERSONAL FINANCIAL STATEMENT AS OF ______________

SUBMITTED TO:

PERSONAL INFORMATION

APPLICANT (NAME)

 

CO-APPLICANT (NAME)

 

Employer

 

Employer

 

Address of Employer

 

Address of Employer

 

Business Phone No.

 

No. Of Years with

Employer

Title/Position

 

Business Phone No. No. of Years with Title/Position

 

Name of previous employer & position (if above is less than 3 yrs.) No. of Yrs. Name of previous employer & position (if above is less than 3 yrs.) No. of Yrs.

Home Address

 

Home Address

 

Home Phone No.

 

Cell Phone No. Date of Birth

 

Home Phone No. Cell Phone No. Date of Birth

Email Address: Social Security No.

 

Email Address: Social Security No.

 

Name, Phone No. of your Accountant

 

Name, Phone No. of your Accountant

Name, Phone No. of your Attorney

 

Name, Phone No. of your Attorney

Name, Phone No. of your Investment Advisor/Broker Name, Phone No. of your Investment Advisor/Broker

Name, Phone No. of your Insurance Advisor Name, Phone No. of your Insurance Advisor

 

Cash Income & Expenditures Statement For Year Ended (Omit cents)

ANNUAL INCOME AMOUNT ($) ANNUAL EXPENDITURES AMOUNT ($)

Salary (applicant) $ Federal Income and other taxes $

Salary (co-applicant) State Income and other taxes

Bonuses & Commissions (Applicant) Rental Payments, Co-op, or Condo Maintenance

Bonuses & Commissions (co-applicant) Mortgage payments Residential

Investment

Rental Income Property Taxes Residential

Investment

Interest Income Interest & Principal Payments on Loans

Dividend Income Insurance

Capital Gains Investments (including tax shelters)

Partnership Income Alimony/Child Support

Other Investment Income Tuition

Other Income (List)** Other Living Expenses

Medical

Other Expense (List)

 

TOTAL INCOME 

$

 

TOTAL EXPENDITURES 

$

Any significant changes expected in the next 12 months?  Yes  No (If yes, attach information).

** Income from alimony, child support, or separate maintenance income need not be revealed if the applicant or co-applicant does not

wish to have it considered as a basis for repaying this obligation.

Balance Sheet as of ______________________

 

ASSETS AMOUNT ($) LIABILITIES AMOUNT ($)

Cash in this Bank

(Including money market accounts, CDs)

$

Notes Payable to this Bank

X X X

Secured

$

Cash in Other Financial Institutions (List)

(including money market accounts, CDs)

Unsecured

Notes Payable to Others (Schedule E)

X X X

Secured

Unsecured

Accounts Payable (including credit cards)

Margin Accounts

Readily Marketable Securities (Schedule A) Notes Due: Partnership (Schedule D)

Non-Readily Marketable Securities (Schedule A) Taxes Payable

Accounts and Notes Receivable Mortgage Debt (Schedule C)

Net Cash Surrender Value of Life Insurance (Schedule B) Life Insurance Loans (Schedule B)

Residential Real Estate (Schedule C) Other Liabilities (List):

Real Estate Investments (Schedule C)

Partnerships / PC Interests (Schedule D)

IRA, Keogh, profit-sharing & Other Vested Retirement

Accts.

 

Deferred Income (number of years deferred_____)

Personal Property (including automobiles)

Other Assets (List):

 

TOTAL LIABILITIES

NET WORTH

 

$

 

$

 

CONTINGENT LIABILITIES YES NO AMOUNT

Are you a guarantor, co-maker, or endorser for any debt of an individual,

corporation, or partnership

 

 

 

 

$______________________

Do you have any outstanding letters of credit or surety bonds?

 

 

$______________________

Are there any suits or legal actions pending against you?

 

 

$______________________

Are you contingently liable on any lease or contract?

 

 

$______________________

Are any of your tax obligations past due?

 

$______________________

What would be your total estimated tax liability if you were to sell your major

assets?

 

$____________________

If yes for any of the above, give details:

 

 

 

 

 

 

SCHEDULE A – ALL SECURITIES (including non -money market mutual funds)

No. of Shares

(Stock) or Face

Value (Bonds)

 

DESCRIPTION

 

OWNER(S)

 

WHERE HELD

 

COST

 

CURRENT

MARKET VALUE

PLEDGED

YES NO

READILY MARKETABLE SECURITIES (including U.S. Governments and Municipals)*

 

 

 

 

 

 

 

 

NON-READILY MARKETABLE SECURITIES (closely held, thinly traded, or restricted stock)

 

 

 

 

* If not enough space, attach a separate schedule or brokerage statement and enter totals only.

Schedule B – Insurance

Life Insurance (Use additional sheet if necessary)

 

Insurance Company

 

Face Amount of

Policy

 

Type of Policy

 

Beneficiary

 

Cash Surrender

Value

 

Amount Borrowed

 

Ownership

 

 

 

 

 

Disability Insurance Applicant Co-Applicant

Monthly Distribution if Disabled

Number of Years Covered

 

 

Schedule C – Personal Residence & Real Estate Investments, Mortgage Debt (majority ownership only)

 

Personal Residence

Property Address

 

 

Legal Owner

 

Purchase

 

Market

Value

Present

Loan

Balance

 

Interest

Rate

Loan

Maturity

Date

 

Monthly

Payment

 

 

Lender

Year Price

 

 

 

 

 

Investment

Property Address

 

 

Legal Owner

 

Purchase

 

Market

Value

Present

Loan

Balance

 

Interest

Rate

Loan

Maturity

Date

 

Monthly

Payment

 

 

Lender

Year Price

 

 

 

 

 

 

Schedule D – Partnerships (less than majority ownership for real estate partnerships)*

 

Type of Investment

 

Date of Initial

Investment

 

Cost

 

Percent

Owned

 

Current Market Value

Balance Due on

Partnerships: Notes,

Cash Call

Final

Contribution

Date

Business/Professional (indicate name):

 

 

 

Investments (Including Tax Shelters):

 

 

 

 

 

 

 

 

 

 

* NOTE: For investments which represent a material portion of your total assets, please include the relevant financial statements or

tax returns, or in the case of partnership investments or S -corporations, Schedule K-1S.

 

Schedule E – Notes Payable

 

Due to

 

Type of Facility

 

Amount of Line

Secured

Collateral

Interest

Rate

 

Maturity

Unpaid

Balance

Yes No

 

 

 

 

 

 

 

 

 

 

Representations, Warranties and Authorizations:

This personal statement is provided to the Bank in support of an applicati on for (check one):

 Individual Business Credit (applicant);

 Joint Business Credit (applicant/co -applicant);

 Personal Guarantee of the business obligations of another person or entity

 

The information contained in this statement is provided to induc e you to extend or to continue the extension of credit to the undersigned or to others

upon the guarantee of the undersigned. The undersigned acknowledge and understand that you are relying on the information pro vided herein in

deciding to grant or continue credit or to accept a guarantee thereof. Each of the undersigned represents, warrants and certifies that the information

provided herein is true, correct and complete. Each of the undersigned agrees to notify you immediately and in writing of an y change in name, address,

or employment and of any material adverse change (1) in any of the information contained in this statement or (2) in the fina ncial condition of any of

the undersigned or (3) in the ability of any of the undersigned to performed its (or t heir) obligations to you. In the absence of such notice or a new and

full written statement, this should be considered as a continuing statement and substantially correct. If the undersigned fa il to notify you as required

above, or if any of the information herein should prove to be inaccurate or incomplete in any material respect, you may declare the indebtedness of the

undersigned or the indebtedness guaranteed by the undersigned, as the case may be, immediately due and payable. You are auth orized to make all

inquiries you deem necessary to verify the accuracy of the information contained herein and to determine the credit -worthiness of the undersigned. The

undersigned authorize any person or consumer reporting agency to give you any information it may have on the undersigned. Each of the undersigned

authorizes you to answer questions about your credit experience with the undersigned. As long as any obligation or guarantee of the undersigned to you

is outstanding, the undersigned shall supply annually an updated financial statement. This personal financial statement and any other financial or other

information that the undersigned give you shall be your property.

Notice Regarding USA Patriot Act: The Bank complies with Section 326 of the USA Patriot Act. This law mandates that we obtain and verify

certain information about you, including your name, legal address, date of birth and social security or tax identification nu mber, while processing your

account application. You will be required to provide a copy of your driver’s license or other government issued photo ID.

Notice of Right to Receive Appraisal Copy: The Bank may order an appraisal in connection with your loan request and charge you for this appraisal.

We will promptly give you a copy of an y appraisal, even if your loan does not close. You can pay for an additional appraisal for your own use at your

own cost.

 

 

Date Applicant/Guarantor’s Signature

 

 

Date Co-Applicant/Guarantor’s Signature

(if you are requesting the financial accommodation jointly)

 
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