How to Finance YourBusiness Start-Up

Aizhan Tursunbayeva

24.09.2011

How to Finance Your Business Start-Up

Access to Credit

Objective:

Understanding how to obtain financial

support for your business during start-up and going forward.

Criteria for Success Business Plan including financial information: Balance

Sheets, P&L Statements, Cash Flows, Budget and Time Line.

Realistic Sales and Revenue Expectations

Know your Opportunities and Risks

Listen to Objections

Learn from Criticism

Understand your Finance Source and its Expectations.

Provide an Exit Strategy

What Constitutes an Effective Business Plan

Mission StatementTwo or three statements that state your mission, vision and values.

Key Business ActivitiesDetermine what your company sells/services.What is your market?

Products and ServiceHow does your product add value?

What Constitutes an EffectiveBusiness Plan

Sales and MarketingSales projections, customer pricing, forecasts and opportunities and risks

Operating PlanFacilities, resources and processes used to run your business

Human ResourcesStructure and people to operate your business.Retention of key employees

What Constitutes an EffectiveBusiness Plan

Financial Plan

Credible projections, stating your financial

needs, balance sheet, P&L statements and cash flow budget.

Future Growth

How will your company grow in 3 to 5 years?

How do you position your company?

What Constitutes an EffectiveBusiness Plan Exit Strategy-Four Ways to Go

IPO

Sale to a Competitor or Partner

Sale to Employees

Family Inheritance

Close

A properly planned exit will determine how you finance your start-up

A properly planned exit can be a lucrative way to realize the value you have created

Starting a Business

Assessment

Develop ideas / business potential

Your Business Plan

How do you plan to finance and market your

business?

Starting a Business

Financing

How to finance your business

First Year

Managing your day-to-day operations and

planning growth

Obstacles to Financing aStart-Up

No track record

Difficult to sell concept

Lack of assets

No record of successful management

Market acceptance

Sources of Finance

Family, friends Personal credit cards Banks Venture capital funds Finance companies Development Banks Governmental programs

Sources of Finance

Every source has its own expectations but all want to profit from their investment

The greater the risk the greater the expectation of high returns

Develop your “Value Proposition”

Sources of Finance:Banks

WHAT DO BANKS LOOK FOR?

Professional Profile

Evaluate your ability to manage the project.

A clear business plan.

Project Viability

Structured and short comments that cover

all the elements of your business

Sources of Finance:Banks

TIPS: Prove or qualify every conclusion you make

Stick to your project – one clear and complete idea to many vague possibilities

Help your banker to understand – Avoid

technical details or language unless necessary

Sources of Finance:Banks

Show how you will succeed

Ability to repay your obligations

Your forecast should prove how the project will be profitable.

Keep it to a business proposition

Concentrate on viability

Sources of Finance:Venture Capital

Want high returns, equity, an exit strategy, a position on your board and will judge your proposal by the companies management experience

Will provide funding on a success basis only and will withdraw funds if the company does not meet its projections

Business Plan and complete financial projections

Sources of Finance:Finance Companies

Specialized lenders – Products include leasing, subordinated debt, personal

quarantines, etc.

Sources of Finance:

Loans and Grants

Loans or leases

Complements other lenders

Finance start-ups

How to Deal with Your Lenders

Keep them apprised of your business

Provide periodic financial information

Let them know the good and bad news. It is best that any bad news comes from you and you can explain how you plan to overcome the problem

Types of Credit Loans

Requires collateral

Credit – Short and Long Term

LeasingAsset based lending, the asset is the collateral, the terms fit the equipment and normally does not require prior credit history

Credit LinesUse of personal credit facility. Expensive andnormally is not sufficient

Questions