FINANCE, PROTECT, AND INSURE YOUR BUSINESS

1. Chapter 7 FINANCE, PROTECT, AND INSURE YOUR BUSINESS 7.1 Put Together a Financial Plan 7.2 Obtain Financing for Your Business 7.3 Protect Your Business 7.4 Insure Your Business

2. Chapter 7 7.1 Review • What are the one time only expenses that are paid to establish a business • Start-up costs • Describes how much cash goes in and out of a business over a period of time • Cash flow statement • Expenses that are incurred by a business every month • Operating expense

3. Chapter 7 7.1 Review cont. • A financial statement that shows how much money a business earns or loses • Income statement • Shows the assets, liabilities, and capital of a business at a particular point in time • Balance Sheet • What is the accounting equation? • Assets= Liabilities+ Owner’s equity

4. Chapter 7 7.1 Review cont. • Types of Assets • Fixed, current, A/R • Types of Liabilities • Long-term, current, A/P • The amount a company estimates it will not receive from customers • Uncollectible accounts • Lowering of an assets value to reflect its current worth • depreciation

5. Chapter 7 Lesson 7.2OBTAIN FINANCING FOR YOUR BUSINESS • Consider different types of bank loans. • Explain Small Business Administration loans. • Evaluate other sources that can provide debt capital. GOALS

6. Chapter 7 • Many companies take out loans from banks. You obtain debt capital when you borrow from banks. Debt capital is money loaned to a business with the understanding that it will be repaid, with interest, in a certain time period.

7. Chapter 7 BANK LOANS • Types of bank loans • Secured loans • Unsecured loans

8. Chapter 7 Secured Loans • Secured loans are backed by collateral, which is property that the borrowers forfeit of he or she defaults on the loan. • Types of secured loans • Line of credit- money whenever the borrower needs it. • Short-term loan- made for a specific purpose; repaid within a year. • Long-term loan- payable over a period longer than a year.

9. Chapter 7 Unsecured Loans • Loans that are not guaranteed with property. These loans are only made to the bank’s most creditworthy customers.

10. Chapter 7 REASONS A BANK MAY NOT LEND MONEY • The business is a start up- has no record of repaying loans • Lack of a solid business plan- poorly written • Lack of adequate experience • Lack of confidence in the borrower • Inadequate investment in the business- banks are suspicious of entrepreneurs who don’t invest their own money

11. Chapter 7 SMALL BUSINESS ADMINISTRATION LOANS • SBA loan assistance • Requirements of SBA loans • Apply for an SBA loan • www.sba.gov

12. Chapter 7 REQUIREMENTS OF SBA LOANS • Your business must be considered a small business. • Your business must not be the leader in its field. • Your business must comply with all federal employment laws. • Your business cannot create or distribute ideas or opinions. • You must have been unable to obtain financing from a commercial bank. • You must invest a reasonable amount of your own money in the venture. • You must provide adequate collateral.

13. Chapter 7 OTHER SOURCES OF LOANS • Small Business Investment Companies—SBIC • Minority Enterprise Small Business Investment Companies—MESBIC • Department Of Housing And Urban Development—HUD • Economic Development Administration—EDA • State governments • Local and municipal governments

14. Chapter 7 FINANCE YOUR BUSINESS WITH EQUITY CAPITAL • Equity capital is money invested in a business in return for a share in the business’s profits. • Sources of equity • Personal financing • Friends and family • Venture capitalist- people or companies who make a living by providing loans to start-up businesses