1. I. Financing Your Business
Four questions you should be able to answer:
How much money do you need?
What will you use the money for?
Where will you find it?
How will you pay it back? (Lender), or What is the rate of return on my investment? (Investor)

2. II. Types of Financing Debt Financing vs. Equity Financing
After identifying your financial needs, you must arrange for the financing. Thoroughly understanding the basic types of financing can reveal the options that might be most attractive and realistically available to your particular business. Typically, financing can be divided into two categories: debt financing and equity financing.
Debt financing: Debt financing means borrowing money that must be repaid over a period of time, usually with interest.
Equity financing: Equity financing means raising money in exchange for a share of ownership in the business.

3. Debt Financing Borrowed money that must be repaid
Repayment is done over a period of time and with interest
Lender does not gain an ownership interest in the business
Loan is often secured by company assets and borrowers’ personal guarantee
Sources may include:
Banks
Credit unions
Commercial finance companies
SBA-guaranteed loans
Family members, friends, and former associates

4. Equity Financing
Money raised in exchange for a share of ownership in the business
allows business to obtain funds without incurring debt or having to repay specific amount within specific time
Sources may include investors such as:
Friends
Relatives
Employees
Customers
Industry colleagues
Private investors
Venture capitalists

5. Savings Personal Savings or Retirement Accounts
The most common source of equity financing is the owner’s personal savings and/or contributions from family, friends, and business associates.
* 401k Rollover without tax penalties

6. III. Debt Financing Loans
A bank loan is the most common form of debt financing
Short-term loans: financing for equipment, inventory or working capital needs
Lines of Credit (short-term loan)
Long-term loans: for real-estate, long-term equipment, business acquisition

7. SBA Loans Currently available SBA programs are loan guarantees.
You should start at your regular bank.
You will have to get a commitment before the SBA ever comes into the picture.
Main advantage to an SBA loan guarantee is that it can extend the term of the loan, making the payments smaller.
Like any insurance program, the SBA guarantee fee costs money.

8. Types of SBA Loans Express Loans $20k to $150k Lenders Advantage
SBA 7a
$350k to $5MM
SBA 504
$200k to $5MM

9. Factoring
Factoring is selling your invoices or accounts receivable for immediate cash.
focuses on the credit worthiness of your customers, not your company.
Institutions advance funds up to 75-90%, usually same business day.
1-4% fee for this service
Banks (local)
Non-bank institutions
Online platforms

10. Bank Loan Requirements2 3
Loan
Credit (score ~700)
Capital or Equity (Normally - 20%)
Collateral
Cash Flow 1 4
Conditions
Character

11. Bank Loan Requirements (cont’d)
Management or Industry Experience?
Documents Needed:
Business Plan
Personal Financial Statement
Personal and Business Tax Returns
Resume

12. Understanding Credit (Credit Score)
FICO is an acronym for Fair Isaac Corporation.
The range for a score is 300 to 850.
You are also entitled to a free credit report from each credit reporting company every 12 months due to legislation enacted by Congress.
You cannot get the report directly from the agencies above rather you will need to go to the following website:
It is important to note that you CANNOT get the FICO score with this report.
Myfico.com (credit score website)

13. Identifying Bank Relationships
Large Banks
Wells Fargo
CHASE
BB&T
Bank of America
Regional Banks
First Capital Bank
Prosperity Bank
BBVA
Frost
Community Banks
Southwest Bank
Community National Bank
Commercial State Bank
Security Bank

14. Identifying Bank Relationships (cont.)
Credit Unions
First Basin Credit Union
Southwest Heritage Credit Union
My Community Credit Union
Southwest 66 Credit Union
Non-Bank Financial Institutions
Equipment (SBA 504 & 7a) - GE Capital, Truck/Trailer Finance, Crane & Food Service.
Franchise (SBA 7a Loans)
Hotels (SBA 504 & 7a)

15. Non-Bank Business Loans “Alternative”
Short Term Loans
OnDeck
Kabbage
Long Term Loans
Funding Circle
Lending Club
Fundation
Microlenders
Lift Fund (formerly ACCION)
PeopleFund
Loan Matching Sites
Boefly
Fundera
Lindio
Crowdfunding
Kickstarter
Indiegogo

16. IV. Equity Financing Private Investors:
Many businesses are financed by private investors, and in nearly every case the investor is someone that the business owner knows personally.
Individual Investor (Typically Loan):
Friends
Family
$5k to $25k (loan)
Professional Investor (Loan or Investor):
Doctors,
Attorneys
Entrepreneurs.
$10k to $100k

17. Angel Investors
Angel Groups – Texas Angel Network, Texas Investment Network and Angel Pool
Angels tend to bet on you as a business person, rather than on your idea.
They usually invest with their own money and are usually content to let you run the business as long as you do a good job.
They still expect an opportunity to cash out with a nice profit.
Private investors can put money into your business in a number of ways, including loans, partnerships, and stock purchases.
$100k to $1MM

18. Venture Capitalists
Looking for a huge return in a short period of time.
Usually motivated to invest in companies that have a high probability of going public.
Willing to accept new management.
Project with potential to turn a $20 million investment into $200 million in three to five years.
$2 million and up

19. PEG’s (Private Equity Groups)
Private equity consists of investors and funds that make investments directly into private companies.
Capital for private equity is raised from retail and institutional investors, and can be used to fund new technologies, expand working capital within an owned company, make acquisitions, or to strengthen a balance sheet. 
The majority of private equity consists of institutional investors and accredited investors who can commit large sums of money for long periods of time. Private equity investments often demand long holding periods to allow for a turnaround of a distressed company or a liquidity event such as an IPO or sale to a public company.
$2MM to $70MM

20. V. Grants
Many grants are geographically specific, that is, they are intended to promote economic development in a specific community or region.
Grant programs exist, but many are so highly competitive that your realistic chances of getting any money are pretty slim, and a large number of them are awarded to non- profit organizations.

21. VI. Valuable Tips for loan shopping
Establish banking relationships before you need money.
Don’t expect 100% financing for your business.
Use short term financing for short term needs.
Use long term financing for long term needs.
Pay close attention to your personal credit – it will make a difference.
Be prepared to answer the basic lender questions stated in the 1st page.
If you get turned down for a loan, follow these steps:
Don’t get angry.
Ask why you were denied.
Ask if there is anything you can do to get reconsidered.
Ask for a referral to another bank that might be interested.