Who is SCORE ?

1. Who is SCORE ? Welcome to this Seminar An Introduction to Starting & Growing a Small Business

2. Financial Management • Funding • the Business

3. How Much Will You Need? A Basic Question….. “How Much Will You Need To Start & Run a Business ?”

4. How Much Will You Need? There is no Easy Answer Depends on type of business. You will have to work that out

5. How Much Will You Need? Compare Start-up & Running Costs Low cost – Easy entry • Technical Services – Writer. Bookkeeper. Graphic Artist. • Home Services - House Cleaning. Landscaping. • Construction Trades - Plumber. Painter. Electrician. Higher cost – Tougher entry (Start Small & Grow) • Retail Store – Hardware. Clothing. • Food Industry - Grocery. Catering Service. Restaurant. • Manufacturing – Machine Parts. Toys

6. How Much Will You Need? Make a Plan Do the Math ! Calculate the following : • Start-up Costs – legal, leases, inventory, equipment, training etc. • Monthly Operating Expenses – rent, utilities, travel, inventory, • Expected Sales Income – assume a slow start • Cash Flow – balance sales income & operating expenses. . Is this a profitable, long-term business ? Does it provide an adequate income for owners ? Make your plan with help from SCORE.

7. How Much Will You Need? DON'T FORGET WORKING CAPITAL That's the money you will need to get started and to live with until income starts to flow

8. Profit and Loss Statement

9. What will this tell you Do you have a viable business

10. Example Client wants to open a bakery o Sell pies for $4.00 each o Costs $2.00 to make o Net Profit is $2.00 per pie Income goal: $500 per week Must make and sell 250 pies per week

11. What does this tell us 1. Can you sell 250 pies per week 2. Can you make 250 pies per week It prepares you for what is to come and helps set realistic expectation

12. Financial Management Can a Profitable Business be In Financial Trouble?

13. Can a Profitable Business be in Trouble? Yes ! When there is No Cash at Bank to pay the bills Why & When ? • Too much inventory • Giving too much credit. • Late payers - Non-payers. • Late delivery of a large contract. • Excessive withdrawals by owners.

14. Cash & Cash Flow For your very survival Cash at Bank & Managing Your Cash Flow Are VERY, VERY Important “No Cash – No Business” “CASH is KING”

15. Cash Flow Example 30 Day Collection Cycle

16. Cash Flow 2Poor Collection Process Delayed Collection Cycle

17. What is Cash Flow – keeping the bucket full INCOME Sales. Interest. Etc. Loans & Investments. CASH at BANK Cash Flow is:- Maintaining Sufficient Cash at Bank to Pay Due Bills $ Owners Drawings FIXED COSTS Rent. Insurances , Vehicle Payments. VARIABLE COSTS Inventory. Salaries. Utilities, Repairs.

18. Funding the Business Finding The Money You Need

19. Sources of Funding Banks are usually very reluctant to make loans to any business without a 2 or 3 year track record. Small local banks may be more helpful Personal & Private Funding are most likely options for a start-up.

20. Sources of Funding • Yourself– Personal Savings • Loans – Family, Friends, Partners. • Loans are re-payable plus interest. • Perhaps Banks, but with personal guarantees & collateral • Investments– from Partners, Investors – Family & Friends • Investors own part of business & expect share of profits. • But they risk total loss if business fails. • Partnership & Investors Agreements are essential. • Get Professional Advice.

21. Sources of Funding • Some Sources of Personal Funding • Home Equity Loan. • Insurance Policies. • Pension & 401(k) – take care – get CPA’s advice. • Savings & CD’s. • Stocks & Bonds. • Sale of Personal Assets. • Use Credit Cards for your convenience, • and only if balance is paid, in full, each month.

22. Alternative Funding Solutions • Second Income– From a Spouse, Pension. Trust fund. • Start Part-time– Work Evenings & Week-ends for yourself. • Share Low cost Premises – Home Office, Friend’s Workshop. • Minimum Inventory – Live & Work Frugally. • OPM – Use Other People’s Money. • - Suppliers Credit, Early Payments from Customers. • Practical Support from Family & Friends.

23. Entrepreneur Works A non-profit 501(c)(3) microenterprise development organization focused on growing businesses and jobs in our local communities. Our mission is to cultivate and promote successful entrepreneurs in underserved areas of the Greater Philadelphia region – entrepreneurs who then become economic engines in their own neighborhoods.

24. To Get a Loan • You will Need • 2 Business and Personal References • 3 Months of Personal Bank Statements • Proof of address for individual(s) and business (if applicable). • Personal Tax Returns: Last 3 years for all owners • Business Tax Returns • Completed Business Plan • Personal Resume • Business Financial Statements • Cash Flow Projections

25. SBA • SBA Guaranteed Loans • Go to – www.SBA.gov – for more information • . • SBA does not make GRANTS or LOANS • SBA guarantees Banks for “higher risk” loans. • Apply to your Bank for a SBA Guaranteed Loan. • SBA loans likely to be more expensive. • Banks & SBA require Business Plan & Collateral.

26. Funding the Business Good Luck !

27. You Bank SBA SBA agrees to guarantee Bank against loss if loan goes bad Bank provides SBA Guaranteed Loan Bank provides Commercial Loan Bank unsure about making loan Bank asks SBA to “insure’ loan against default Bank denies loan request

28. Funding the Business Raising Loans from Commercial Banks

29. Funding the Business Before Applying for a Loan Get to know your Bankers Get the Company “clean” Write a Business Plan. Cash Flow Projections are important. They show how you will repay the loan Call SCORE for practical advice Get professional advice from CPA

30. Funding the Business • What the Bank wants to know. • “Will we get our money back ?” • How much are you investing ? • What’s your equity in the business ? • What collateral secures this loan ? • Your management experience ? • Your technical expertise ? • Your commitment to the business ? • Does Business Plan make sense ?