FOR VENTURE BUSINESSES FINANCING SOURCES FOR VENTURE BUSINESSES

VENTURE LIFE CYCLE Development Stage Start-up Stage Survival/Early Growth Stage Rapid Growth Stage Maturity Stage

DEVELOPMENT STAGE Progressing from an Idea to a Business Opportunity Development of a Prototype Trial Service Trial Process Seed Financing from Personal Assets Family and Friends Business Angels

START-UP STAGE The Venture is Organized C Corp S Corp Partnership (General, Limited) LLC Operating Agreement

START-UP STAGE (cont.) The Venture is 2. Developed Facilities Acquired Equipment Acquired Employees Hired Inventories Acquired

START-UP STAGE (cont.) Venture Operations Begin Revenue Generation (Sales) Working Capital Requirements Overhead/Production Expenditures Receivables Payables

START-UP STAGE (cont.) In addition to those sources in the Development Stage, Start-up financing comes from Strategic Partners Venture Capitalists Asset-based Lenders Equipment Lessors

SURVIVAL/EARLY GROWTH STAGE Revenues begin to grow and cash flows begin to pay for some of the expenses. Working capital shortfalls occur as cash requirements exceed cash inflows. New sources of first round financing become available through Suppliers and Customers Government Assistance Programs Commercial Banks (Factoring)

RAPID GROWTH STAGE Revenues and Cash Inflows grow rapidly. Market share increases significantly. Economies of scale in production and distribution are realized. Net Income is positive. Sources of Second Round financing include Commercial Banks (Revolving Line of Credit) Investment Bankers

MATURITY STAGE Growth of revenues and cash flows continues but at a much slower rate. Most of the venture value has been created. Financing is available from traditional sources Commercial Banks Privately placed loans IPOs

SBA LOANS 7(a) Loan Guaranty – Term Loans Maturities: Up to 7 years for working capital Up to 15 years for equipment Up to 25 years for owner occupied real estate Interest Rates – New York Low Prime + 2.25% on maturities less than 7 years. New York Prime + 2.75% on maturities greater than 7 years Guarantee up to 85% of loans up to $100,000. Up to 75% of loans from $100,000 - $750,000

SBA LOANS (cont.) 2. Low Doc Loans Many banks will not go through the “hassles” of dealing with the SBA on loans less than $100,000. To encourage smaller loans ($5,000 to $100,000), the SBA will rebate 1% of the 2% guarantee fee and allow the lender to charge 3.25% over New York Prime to encourage this program. Low Doc means low documentation and is a one page application for loans under $50,000 and 2 pages for loans between $50,000 and $100,000. Is a character loan program meaning they lend more on our credit history rather than just the numbers (less collateral, higher debt ratios, etc.)

SBA LOANS (cont.) 3. Export Working Capital Program Guarantees up to 90% of a secured loan, or $750,000 whichever is less. Maturities may be up to three years. For single or multiple export sales including pre-shipment working capital. 4. MicroLoan Program – 7(m) Program Short-term loans of up to $25,000 for working capital, furniture or equipment. Cannot be used to pay existing debt.

SBA LOANS (cont.) 5. Greenline A revolving line of credit (RLOC) initiated in 1992 subject to a borrowing base (80% of A/R and 50% of inventory). Loans under $200,000 not subject to as much administration and are called Cap Line Loans. Loans over $200,000 are similar to asset base lending with many lender requirements on monitoring the loan. Commitment up to 5 years. Loan can be termed out at maturity. On maturities less than 1 year, guarantee fee to SBA is ¼% rather than 3+%. Over 1 year maturity, subject to 3% guarantee fee on the first $250k, 3.5% on next $250k and 3.875% on final $250k

OUTLINE FOR A BUSINESS PLAN I. Table of Contents   II. Executive Summary – Stand-alone summary that should provide sufficient motivation to read the entire plan III. Company Description What is your business? What are your products and services? What are your markets? What is your distinctive competency?

BUSINESS PLAN (cont.) IV. Market Analysis Industry What is your industry? How big is it now? In two years? In five years? What are its characteristics Who are the customers What are the historical trends and projections for the future?

BUSINESS PLAN (cont.) 2. Target Markets What market segments are you, or do you intend, to penetrate? What regulations exist, if any? Competition How many companies will compete with you and who are those companies? How do you compare to these companies? What is the market share of each competitor? Will you be considered a major threat to these companies and how will they react?

BUSINESS PLAN (cont.) 4. Customers Have you identified and talked to prospective customers? What were their reactions? Strategic Marketing Marketing strategy Sales appeal Distribution Promotion Pricing Product support and service

BUSINESS PLAN (cont.) 6. Selling How will you identify and target prospective customers? What level of selling effort will be required? V. Technology – Patents/copyrights Operations How will you actually produce your product or service? How much will be internally generated? How much will be outsourced?

BUSINESS PLAN (cont.) How will the transportation or distribution be accomplished? How long will it take? Do you have reliable vendors? Back-up vendors? What are the costs of production and transportation at different volume levels? VII. Management Who are your managers? What experience and skills do they have? How will they be compensated?

BUSINESS PLAN (cont.) VIII. Personnel How many people will you need? What skills will they have? How will they be compensated? IX. Required Financing How much capital do you require now? When will you require more? How much will you need? Why will you need it? What will be the best means of raising the funds?

BUSINESS PLAN (cont.) X. Financial Data Income Statements Balance Sheets Statement of Cash Flows Cash Budget (or Sources and Uses of Funds) Manufacturing Budget and Shipping Plan List of key assumptions used in the preparation of the proformas

BUSINESS PLAN (cont.) Miscellaneous Information What will the company be named and what will be its organizational form? Are there any trademarks or patents to consider? XII. Appendices