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How to Obtain the Right Financing for Your Business

How to Obtain the Right Financing for Your Business. Capital Requirements Fixed Assets: Building, machines, and equipment Working Capital. Types Of Financing. Debt Lender’s Income Does Not Vary With Business Success Equity Stockholder’s Income Does Vary With Business Success.

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How to Obtain the Right Financing for Your Business

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  1. How to Obtain the Right Financing for Your Business Capital Requirements • Fixed Assets: Building, machines, and equipment • Working Capital

  2. Types Of Financing • Debt Lender’s Income Does Not Vary With Business Success • Equity Stockholder’s Income Does Vary With Business Success

  3. Cash Budgets • Estimate Working Capital Needs • Reflects When • Revenue Collected • Expenses Paid • Considers Seasonal Revenue Fluctuations For Obtaining Working Capital (Line Of Credit) Loans

  4. Equity Financing • Equity is the Owner’s Share Of the Firm’s Assets • Proprietorship/Partnership Equals Owner’s Personal Assets • Corporation = Stock, 1 Share = 1 Vote • Common • Preferred • Investment Liquidity Depends On Market

  5. Common Stockholders • Real Owners Of Corporation • Financial Claim Is After All Others • Right To Vote • Control Management Royalty-Free/CORBIS

  6. Small BusinessShare Of Stock

  7. Preferred Stockholders • Claim To Profits • Before Common Stock Dividends • Not Legally Enforceable • No Voting Rights • Fixed Par Value & Dividend • Cumulative Dividend

  8. Sources ofEquity Financing • Self • Small Business Investment Companies (SBICs) • Venture Capitalists • Angel Capitalists • Other • Business Incubators • Employee Stock Ownership • Customers

  9. Debt Financing • Comes From Lenders • Must Be Repaid • At Specified Interest Rate • Within Agreed-Upon Time Span • Legal Claim On Assets Before Stockholders • Equity = Safety Net For Lenders

  10. Debt Securities • Bond • Publicly Issued • Large Companies • Loan • Commercial Banks • Insurance Companies • Finance Companies

  11. Bonds • Standard Denomination • Method Of Interest Payment • Method Of Principal Payment Suppliers OfSmall Firm Credit

  12. Lenders Want To Know • Startup • Can You Live Without Income From Business? • Loan Repayment? • Collateral? • Existing • Track Record • Future Difference?

  13. DevelopingMarket Strategies Superior Marketing • Moves Quickly • Pricing Differential • Attention to Packaging • Build Customer Loyalty • Samples/Demonstrations • Educate Customers

  14. Marketing Concept: Giving Special Consideration To The Needs, Desires, And Wishes Of Present And Prospective Customers.”E-Commerce“…Technology-Mediated Exchanges Between Parties As Well As The Electronically Based Intra- Or Inter organizational Activities That Facilitate Such Exchanges.”

  15. MarketingResearch Areas • Identify Customers • Determine Needs • Evaluate Sales Potential • Select Appropriate Channel Of Distribution • Evaluate Advertising & Promotion • Sources of Information

  16. Marketing Mix (4 Ps) Pricing (4 Cs) Product Place Promotion Price Customer Company Competition Constraints

  17. Packaging • Product • Promotes • Protects • Identification • Improves Product Convenience • Promotes Brand Recognition • Influences Buying Decision

  18. SmallBusiness Price Setting • Service Firms • Retailers • Customary Price • Unit Price • Loss Leader • Wholesalers • Producers • Building Contractors = Cost-Plus

  19. DevelopingAdvertising Program • Promoting and Distributing Advertising: Informs customers of the availability, desirability, and uses of products.” • Budget • Media • What/How To Say It • Agency • Expected Results

  20. Advertising Budget • Percentage Of Sales/Profits • Units Of Sales • Objective- Immediate Response • Executive Decision

  21. Media Selection • Newspaper • Signage • Direct Mail • Circulars/Handbills • Yellow Pages • Radio • Television • Online

  22. Why PeopleDon’t Shop Online • Isn’t secure • Jeopardize Privacy • Must Pay Shipping Charges • Not Enough Selection • Can’t Touch/Try First • No Satisfaction Guarantee • Returns A Hassle • Won’t Arrive On Time • Hard To Find Things • Enjoy Shopping Out Of House

  23. Infomercial: long, usually half-hour TV ads hosted by a hyper ‘sell evangelist’ selling a relatively new product or service.”Distribution: Involves the effective movement of a product from the production line to the final consumer.”

  24. DistributionChannels: Consumer Goods

  25. DistributionChannels: Industrial Goods

  26. Intermediaries Quality: product characteristics and/or the probability of meeting established standards.” • Brokers • Agents • Wholesalers • Retailers Quality Control Standards = Customer Expectations

  27. Quality Involves • Strength • Color • Taste • Smell • Content • Weight • Tone • Look • Capacity • Accomplishment • Creativity • Reliability • Etc. Total Quality Management

  28. Improving &Controlling Quality • Quality Circles • Design • Good Process Quality Circle Operation

  29. Quality Control Steps • Set Standards • Measure Performance • Compare Performance • Make Corrections Risk Management, Insurance,And Crime Prevention

  30. Types Of RiskPure- UnpredictableSpeculative- Voluntary • Avoidance • Prevention/Control • Transfer • Assumption- Self-Insurance Coping With Risk

  31. Determine Insurance Need What Will Happen If: • I Die • Fire • Theft/Embezzlement • Robbery • Settlement • Unauthorized Information

  32. Types Of Insurance • Fire • Business Interruption • Casualty • Product/Service Liability • Workers’ Compensation • Group Health/Life • Business Owner • Fidelity/Surety Bonds

  33. Actions To Improve Safety • Involve Employees • Establish Communications • Companywide Participation • Safety Awards • Exciting Program • Be Watchful

  34. Criteria ForInsurer Comparison • Financial Stability & Safety • Specialization • Tailor Policy • Cost Of Protection

  35. CrimePrevention For Protection • Zero-Tolerance Policy • Screen • Train • Defuse Disputes • Check Security • Terminate With Care

  36. Sources OfInventory Theft

  37. Preventing Theft • Mirrors • Cameras/Monitors • Noise Activators • Employee Honesty Tests • Security Guards • Security Audits • Spot Checks • Physical Inventory Checks

  38. White Collar Crime “…committed by managerial, professional, and technical employees.”

  39. Types OfWhite Collar Crime • Falsification Of Accounts • Fraudulent Computer Use • Bribing Officials • Collusion • Sale Of Proprietary Information • Sabotage

  40. Computer Crimes • Intentional Destruction Of Data • Fraudulent Use Document Security • List of Authorized Personnel • No Permission to Remove Sensitive Document from Premises

  41. MinimizeWhite Collar Crime • Track Cost • Increase Budget • Ban Criminals • Crack Down On Tax Avoidance • Restore Rights • Democratize • Rein In Pay • Regulate Trading • Expand Disclosure • End Conflicts Of Interest • Fix Pensions • Foster Discussion

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