FINANCE, PROTECT, AND INSURE YOUR BUSINESS Entrepreneurship 4/16/2017 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 Chapter 7

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

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

7.1 Review cont. Types of Assets Types of Liabilities 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

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

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.

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

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.

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

REASONS A BANK MAY NOT LEND MONEY 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

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

REQUIREMENTS OF SBA LOANS 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.

OTHER SOURCES OF LOANS Small Business Investment Companies—SBIC 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

FINANCE YOUR BUSINESS WITH EQUITY CAPITAL 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