1. FOR VENTURE BUSINESSES
FINANCING SOURCES
FOR VENTURE BUSINESSES

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

3. 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

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

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

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

7. 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

8. 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)

9. 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

10. 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

11. 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 % on maturities less than 7 years. New York Prime % 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

12. 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.)

13. 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.

14. 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

15. 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?

16. 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?

17. 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?

18. 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

19. 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?

20. 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?

21. 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?

22. 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

23. 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