Entrpereneurship Funding and Financing

As long as you’re going to be thinking anyway, think big. Donald Trump

Funding and Financing Any viable business startup needs to be financed (to pay salaries, rent, product development, etc.). There are different options for financing. The government provides different resources for entrepreneurs who are starting their business (to encourage entrepreneurship).

How and Where to Start Get informed about the different funding resources The government usually offers different venues of financial assistance to start-ups There are organizations in your university and other non governmental organizations that would help to provide funding or information about it.

Decide the Type of Financing Self- financing Grants Bank loan Investors

Self-Financing Self-financing means that you provide the funds needed to start your business According to Entrepreneur magazine, it is the number one source of start-up financing for small businesses You can save up money, use preexisting savings, take out a home equity loan, etc.

Grants Usually there are opportunities to get grant to fund your new business The source of grants are the government and non governmental organizations. Some grants are awarded to the best business plan or business team (merit-based) You do not need to pay back the grant !

Bank Loan Bank loans are a good option for financing a new business Bank loans are based on your credit, a solid business plan, experience, assets, and sometimes a personal guarantee that the loan will be paid back. If you are taking the bank loan route, be sure to contact different banks, and get the best terms and/or interest rate.

Investors Financing from friends or family members- who have extra money and want to help Financing from a person who invest in the business usually to gain stock or equity Private equity investors are usually made by individuals or privately owned companies Venture capital investors are also from private equity but they tend to be more hands-on, they bring managerial or technical knowledge to help grow the business

Important Terms Financing to help with the cost of starting a business prior to when goods or services can be sold is called? a)Pre-financing b)Post financing c)Start-up financing d)None of the above

Important Terms What is an internal source of finance? a)Profit b)Interest c)Loans d)None of the above

Important Terms What is "Trade Credit?" a)Services or product traded for other services or product. b)Money owed to another business for services or product. c)A credit card used to pay for services or product. d)None of the above

Shop Around ! Explore your options Shopping around is not costly

Once you start getting Finance Procure a place of business Materials and supplies Maintain a budget

Example: The case of Majd Majd wants to start his own business He has come up with a business plan He makes a list of all of the equipment he needs He gets additional funds from the potential employees

In the case of Majd, his employees invest in the company. What kind of investors are they? a)Angel Investors b)Venture Capital Investors c)Self-financing d)None of the above Which of the following is NOT one of the three main types of investors? a)Private Equity b)Venture Capital c)Angel d)Self-Financing Example: The case of Majd

In the case of Majd, his employees invest in the company. What kind of investors are they? a)Angel Investors b)Venture Capital Investors c)Self-financing d)None of the above Angel investing is a person, or persons, who invests in businesses that do not get the attention of venture capitalists. These investors usually gain stock or equity in the company. Which of the following is NOT one of the three main types of investors? a)Private Equity b)Venture Capital c)Angel d)Self-Financing The three most common types of investors are Private Equity, Venture Capital, and Angel investing. Example: The case of Majd

Group Activity (Financial Plan: Basic Terms) Refer to the document of (Harvard Business School Press) titled (Writing a Business Plan: The Basics). In teams of two students, discuss the section of Financial Plan (pages 25 to 35). Continue on next slide

Provide a short definition of the following terms: –Assets –Liabilities –Owner’s Equity –The Balance Sheet –The Income Statement –Depreciation –The Cash Flow Statement The lecturer will pass among the teams and respond to your questions Each team should write the answers on a separate sheet and provide it at the beginning of next class (assignment) Group Activity (Financial Plan: Basic Terms)