0. Assistant Vice President
Financing A Business
Presented By:
Mary E. Stoick
Assistant Vice President
Business Banking
Direct: (952)

1. John D. Rockefeller, Entrepreneur and Philanthropist
Thought for the Day
“I believe it is my duty to make money and still more money; and to use the money I make for the good of my fellow men according to the dictates of my conscience.”
John D. Rockefeller, Entrepreneur and Philanthropist

2. Sources of Financing Equity Debt Development
Use own cash
Investors (Angels, Venture Capital, Corporations, Mezzanine)
Debt
Family and friends
Banks
Alternative financiers (Leasing, Asset-based, city or community-based)
Development
Local
State
Federal
“Bootstrapping” = Personal savings, limited pay to owners, low overhead (rent), credit cards, home equity loans
Considerations of financing = Desired control
For investors = Need to determine agreeable valuation method

3. Applying for a Business Loan
Minimum information needed to provide bank:
All businesses:
Formation documents
Three years personal tax returns on all owners
Current personal financial statement from all owners
Start-ups:
1. Business plan
2. Projections – including P&L and balance sheet
3. Resumes of key principals and management team
4. Source of down payment/equity contribution
Existing businesses:
1. Three years financial statements and tax returns
2. Interim financial statements, accounts receivable aging reports
3. Business debt schedule
Owners > 20%

4. Banks are Lending!

5. What Are Banks Looking For?
5 “C’s” of Credit:
Character
Capacity
Capital
Collateral
Conditions
BE PREPARED!
Don’t act surprised when a Banker asks you an intelligent question.
Know your personal credit history.

6. How Much Debt Can a Business Qualify For?
Cash Flow
Primary source of repayment
Cash flow to cover fixed charges at least 1.20x
Collateral
Secondary source of repayment
Examples: Cash, Inventory, Accounts Receivable, Equipment, Real Estate
Advance rates = 0-90%
Cash Flow = EBITDA
Fixed Charges = Rent, Debt Service and Lease Pmts

7. SBA Loans Microloan Express LOC 7(a) CAPLines 504 Import/Export
HANDOUT
Cash Flow = EBITDA
Fixed Charges = Rent, Debt Service and Lease Pmts

8. Other Resources City of St Paul DPED: St. Paul Port Authority:
St. Paul Port Authority:
City of Minneapolis CPED:
WomenVenture:
MN Community Capital Fund:
Non-Profits Assistance Fund:
Neighborhood Development Corporation:
Metropolitan Economic Development Association (MEDA):

9. Principles & Practices
Develop and maintain an open and communicative relationship with your Banker and accountant.
Keep clean and organized books from Day 1.
Look at and understand your financial statements.
Reconcile on a timely basis (minimum = monthly).
Use an accounting software system and upgrade regularly.
Keep business and personal expenses separate.
Budget.

10. Why Do New Ventures Fail?
Poor Sales (MAIN REASON)
Small Markets
Products/service does not fit buyers’ criteria/lack of customer understanding
Cost of entry/start-up greater than planned
No competitive edge to gain market share (product, execution, application and resource)
Poor Management
Beyond capabilities
No controls
Ego
Poor Conditions
Inadequate financing/resources
Businesses need to continue to adjust for REALITY as they move forward.
Keep fixed costs low.

11. Another Thought for the Day
“Statistics and formulas are no substitute for judgment.” Henry Clay, U.S. Senator