Advice from CPAs

Securing YourBusiness Financing

Lending 101

• Bank loans are the most common

source of financial support

• Explore alternative funding options

• Your CPA can help!

Types of Financing

• Debt Financing

– Most straightforward

– Interest payments and repayments

due within a specific time

– A standard bank loan

Types of Financing

• Equity Financing

– Raise capital by selling interest to investors

– No guaranteed return

– Investors share in company’s wealth

– May also insist on sharing management and

control

Financing Options

• Which financing option is best for you?• Ask yourself:

– Do you want total control of your business?– Do you want to leave a legacy?– Eventually, do you want to sell your business?

Key Sources of Funding

• Financial Institutions include:– Commercial banks – focus on the needs of small

businesses– Community banks – accommodate both individual

and commercial customers– Credit Unions – support vision of their members

Key Sources of Funding

• Customer or Supplier– Provides discounts for up-front payments– Generates cash for your business

• Factoring or Accounts Receivable– Immediate funding– Factoring agreement can be complicated

Key Sources of Funding• Working Capital

– Similar to a line of credit– Tied to company’s receivables

• Economic Development Groups– Offered through federal, state and local

governments• Friends and Family

– Treat it as a business contract– Create a written agreement to avoid

misunderstandings

A Brief Overview of Equity Financing

• Initial Public Offering (IPO)– Common route for selling stock

• Private Placement– Less complex because investors are pre-selected

• Private Investors– “Angels” take an equity stake in your company

Two Rules of Thumb

• Your company MUST be seen as a good risk:– Be prepared– Have a business plan

• Your CPA can help you identify your goals

Questions and Answers

• Why do you need financing?– Apply for capital with a specific purpose

• Is it urgent, short-term or long-term and how much do you need?– Be specific and detailed

Questions and Answers

• Do I have a realistic plan to generate funds to repay debt? – Present it as a recoverable risk

• How strong is your management team and support staff?– Identify your strengths and weaknesses in advance

An Effective Business Plan

• Executive summary• Explanation and operation of business• Description and qualifications of management• Financial data • Miscellaneous attachments for details

A Few More Tips

• ALWAYS be honest about your financial situation

• Be prepared to discuss any business problems you encountered in the past

• Offer preventative measures• Your candor counts• Work closely with a CPA

Review

• Define your goals• Prepare your business for scrutiny• Demonstrate your company is a good risk• Prepare for questions and answers• Consult with your CPA to determine which

options are best for you

Thank you and good luck!