CHAPTER 4: POTENTIAL

SOURCES OF MONEY TO
START OR EXPAND YOUR
SMALL BUSINESS
Ways To Raise Money
Ways to Raise Money

Types of Loans 2. Equity Investments

 Fully amortized loan An equity investor buys a portion of your
 Balloon payment loan business and becomes part owner. The equity
 investor shares in your profits when you succeed.
Secured Loans
Depending on the legal form of ownership, she only
 Unsecured Loans shares in your losses up to the amount of her initial
investment.

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Ways to Raise Money

Return on Equity Investments Legal Forms of Owning Equity

Every investor has her personal Investments
requirements and every deal is different. ▪ General partnerships
The important thing is that both parties
▪ Limited Liability Companys (LLCs)
understand the risks and think it is a good
deal. If you are starting a new business ▪ Corporations.
and do not plan to guarantee the return of
the investment, you’ll almost always need 3. Loans vs. Equity Investments
to offer investors a high possible return.

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Common Money
Sources to Start or
Expand a Business

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Common Money Sources to Start or Expand a Business

1. Money From Your Personal 5. Creative Cost-Cutting

Savings
6. Equity in Other Assets
2. Living Expense Deferral
7. Supporters
3. Trade Credit
8. Banks
4. Friends, Relatives, and
Business Acquaintances 9. Venture Capitalists

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Additional Money
Sources for an
Existing Business

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 Additional Money Sources for an Existing Business
1. Trade Credit - After you establish a reliable record
of prompt payment with your suppliers, normally they
will consider extending additional credit for your
expansion plans.
2. Commercial Banks - Remember those banks that
were so hard to get money from when you started your
business? Well, once you can show a profitable history,
they become a lot more friendly.
3. Equipment Leasing Companies - Leasing
companies own equipment that they rent to businesses and
individuals.
4. Accounts Receivable Factoring Companies -
Factoring companies—also called factors— buy your
accounts receivable at a discount. Then, they collect your
accounts at full face value. This can be a very expensive
way to raise cash— only recommended as a last resort.
5. Venture Capitalists - Some venture capitalists
specialize in funding businesses after they have a
track record and are willing to take a smaller return
as a result.
6. Money Brokers and Finders - Money brokers and
finders develop and maintain lists of investors and
lenders interested in businesses. For a fee, they will
circulate your financing proposal to potential money
sources.
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Want big impact?
Use big image.

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 “
IF NO ONE WILL FINANCE YOUR
BUSINESS, TRY AGAIN

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If No One Will Finance Your Business, Try Again
Sue Lester tried all the usual sources to get the $20,000 she needed to open a piano school.one person she talked to
was her Aunty Hillary, who had loaned her money to go to school several years before. This time her aunt said “Sorry,
but no.”
One afternoon a few months later, Sue ran into Hillary at her niece’s birthday party, she asked how she was
doing with her plans for school. Sue told her she was still short $10,000 and was going to try the Small Business
Administration as soon as she made one or two changes in her business plan.
Her aunt asked about the changes. Sue told her that an experienced teacher had suggested she charge slightly
more per hour, start with a good second-hand piano instead of a new one, and try to work out a referral arrangement
with a local piano store. This way she could pay herself more salary and wouldn’t need to take another job to make
ends meet. Hillary asked to see the changes when they were complete.
After Sue showed the revised plan to her aunty, she offered to lend her the money. Sue was both delighted and
curious. When Sue asked, her aunt said there were two reasons for her change of heart. First, she was pleased that
more realistic sales projections left Sue enough money to live on so she would be able to keep her enthusiasm for the
hard job of creating a new business. Second, she had sold a small piece of land for more than expected and now had
the money to lend.

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Secondary Sources of Financing for
Start-Ups or Expansion
Secondary Sources of Financing for Start-Ups or Expansion
1. Small Business Administration (SBA)
2. Small Business Investment Companies (SBICs)
3. USDA Rural Development
4. Economic Development Administration (EDA)
5. Federal, State, and Local Programs
6. Overseas Private Investment Corporation (OPIC)
7. Insurance Companies and Pension Funds
8. Advertising Your Project and Selling Stock to the Central Public

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CONCLUSION
There you have it – the primary and secondary
sources of finding money to start your business. If
you really believe in your idea, compete the
business plan outlined in the rest of this book.
Then contact all the sources listed above. If you
have a good plan and refuse to take “NO” for an
answer, you will find the money you need.

“The longest journey begins with a single step”

-The Chinese

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CHAPTER 5: YOUR RESUME
AND FINANCIAL
STATEMENT
There are two important documents for your business plan:

▪ A special business ▪ A financial statement,

accomplishment resume which details the value of
that focuses on those your material possessions.
abilities you’ll need to start
or expand your business.

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Draft Your Business
Accomplishment
Resume

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How do you
demonstrate that
your qualified to
run a business?

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How do you demonstrate that your qualified to run a business?

First, make a list of every job and experience in which you produced positive
accomplishments.
Then, Emphasize your knowledge of how your potential business works and your
knowledge of and respect for financial realities.
Now, that you understand the process and the objectives, write a first draft of your
business accomplishment resume.
* Depending on your experience, your resume probably should be between one and three pages long.

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Draft Your Personal Financial Statement

You can skip this unless you are seeking a loan or investors for your business.
 Draft Your Personal Financial Statement
1. Personal Financial Statement- List of your
personal assets, liabilities, income, and
expenses.
2. Determine Your Assets- Briefly describe and
estimate the current value of everything you own,
3. Equipment Leasing Companies - Leasing
companies own equipment that they rent to businesses
and individuals.
Cash and Cash Equivalents: List the approximate
cash balance in each of your financial accounts, including
accounts in banks, savings and loans, thrifts, credit unions, or
any other institutions.
Marketable Securities: List any stocks, mutual funds, and
bonds you own that are publicly traded. Show the number of
shares or the amount (face value) of bonds, the exchange on which
they are listed, and the current market value.
Cash Value of Life Insurance:. Obtain the value from your
insurance agent. If you own term insurance, there will be no cash
value, so don’t list the policies.
Accounts and Notes Receivable: List each note (loan)
people owe you and show the unpaid balance and payment
schedule, as well as a description of any property securing the note.
Trust Deeds and Mortgages: Itemize any properties you
have sold or lent money against for which you are carrying back a
mortgage (deed of trust). Also list notes you hold that are secured
by real property.
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 Determine Your Assets
Real Estate: If you own valuable property other than
your house, it’s best to include a written appraisal.
• If you own real estate with others and the co-
owners are not going to cosign your business
loan, describe how title is held, such as, “John
Jones as separate property” or “ John Jones and
Mary Smith in joint tenancy.”
Personal Property: Personal property is anything
you own that is not real estate.
Other Assets: Items such as annuities, IRAs, vested
portions of pensions or profit sharing retirement plans,
business interests (value of partnerships, etc.), unlisted
securities, trusts, life estates, copyrights, patents, trademarks,
and so forth should be listed in this section.
• Remember not to list the income generated by
your assets.
Total Assets: Finally, add up the values of all your
property listed on the form. The result is your total assets.
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 Draft Your Personal Financial Statement
4. Determine Your Liabilities- In this part you’ll write
down everything you owe to others.
Credit Cards and Revolving Credit Account: List bank
cards and revolving accounts at stores and with gasoline
companies fill in the outstanding balance.
Unsecured Loans: List any unsecured notes to banks,
individuals, credit unions, savings and loans, or any other person
or institution. These are commonly called signature loans
because all the lender gets is your signature on your promise to
repay the loan – you don’t pledge any collateral.
Loans Secured by Real Estate: List each note and deed
of trust you owe, state the property by which it is secured and the
terms of payment, including any balloon payment and when the
note that will be paid in full, as well as the unpaid balance.
Loans Secured by Personal Property: List any
loans secured by equipment, vehicles, business
inventory, or anything other than real estate. Show the
payee, unpaid balance, security, terms of payment,
including any balloon payment, and when the note will
be paid in full.
Loans Against Life Insurance Policies: if you
borrowed against a whole life insurance policy, list the
insurance company, terms, and outstanding balance.
Other Liabilities: List whatever else you
currently owe. This may include unpaid medical bills, tax
liabilities, unpaid lawyer bills, unpaid alimony or child
support, and debt to bookies.
Total Liabilities: Add up all the amounts you
owe others. The result is your total liabilities.
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 Draft Your Personal Financial Statement
5. Determine your Net Worth- To calculate
your net worth, simply subtract your total
liabilities from your total assets. In the last blank,
add together your total liabilities and net worth.
This figure should match your total assets. If it
doesn’t, you’ve made a mathematical error.
6. Determine Your Annual Income- This shows your
income from all sources. These figures show the
annual total of each income source, don’t confuse
this with the asset section, make sure to also list that
asset in the asset section.
Gross Salary and Wages: List all the sources of
your income, including wages, earnings from your business,
and independent contractor work.
Income from Receivables and Loan
Repayments: If anyone owes you money, list the annual
payments you receive. If you have substantial income
from loans, you may list interest income and principal
repayments separately. Otherwise show the entire
repayment amount.
Rental Property Income: If you rent out real
property or valuable personal property like a truck or
piano, list the annual rental payments here. Include
relevant details, such as your plans to raise the rent in
six months.
Income from Business or Profession: If you
already own a business, list the annual income.
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Determine Your Annual Income
Dividends and Interest: List the source and
annual amount you expect to receive. Make sure that the
information show here corresponds to information you
have shown in the Assets portion of your Personal
Financial Statement (ex. If you list dividend income from
several stocks and bank accounts here, they must be
listed in the Assets portion).
Other Income: Describe any other source of
income, such as payments from judgments, payments
from business investments other than your main
business, trust fund payments, and so forth.
Total Annual Income: Add up the income you
receive from all sources and fill in the total.
6. Determine Your Annual Living Expenses-The goal
of this part of the form is to make an accurate
estimate of how much it costs you to live. Business
expenses should be covered under a separate profit
and loss statement for the business.
Real Estate Loan Payment or Rent: List your
mortgage holder or landlord and your monthly payment,
Indicate whether you rent or own. Fill in the annual total
of all your rental or real estate loan payments, including
principal and interest.
Property Taxes and Assessments: List your
yearly liabilities if you own real property. Also list
business non-real-estate property, such as inventory or
equipment, if it is taxed every year and the taxes are not
shown on statements for your business.
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Determine Your Annual Living Expenses
Federal and State Income Taxes: Show your
totals from last year’s income tax forms. If this year’s,
make an estimate. Especially if you’re an independent
contractor, you may want an accountant to help you
prepare your estimated taxes for the year.
Other Loan Payments: List payments for all of
the non-real-estate loans, notes, charge accounts, and
credit cards you listed in the Liabilities part of the form.
Use last year’s numbers unless they have changed
substantially; if they have, append a sheet and explain.
Insurance Premiums: List everything you
expect to pay for the year that won’t be covered through
your job. Common types of insurance include life,
health, disability, property, and automobile.
Living Expenses: Estimate your other regular
personal living expenses that weren’t covered earlier,
such as utilities, child care, medical and dental costs,
transportation, food, clothing, entertainment, and travel.
Either provide an itemized list or a general category of
expenses.
Other Expenses: List child and/or spousal
support obligations and any other expense not listed
above, like art collection purchases or vacation trips.
Include professional associations that have continuing
education expenses and club membership fees.
Total Annual Expenses: Now add up all your
expenses. If your total is greater than your annual
income total above, examine the information carefully
before you consider borrowing money with a fixed
repayment schedule.
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 Complete Your Personal Financial
Statement
If you have not already done so, print out your spreadsheet, and make sure you sign and date your
completed form. As noted above, many financial institutions prefer their own form, which they will
supply you. However, chances are that you won’t have to redo your Personal Financial Statement
or, if you do, it will be easy.
Verifying The Accuracy of Your Financial
Statement
Verifying The Accuracy of Your Financial Statement

Potential lenders probably will want to verify your financial statements. Tax
returns for the last two or three years are normally adequate to back up your income and
expense statements. If your actual income is somewhat greater than your tax returns
show, be ready to verify your assets in some other way. But don’t worry too much about
this sort of disparity unless it is large. In an age of overly high taxation, your lender will
not be surprised if your actual income is a shade higher than your reported income.
In addition, lenders usually obtain a personal credit check from a credit
information agency on your track record in making payments. That shows what bills
you pay and when, as well as unpaid bills. Credit reports also list your current
employment, lawsuits in which you’re involved, and bankruptcies filed in the last ten
years.

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Verifying The Accuracy of Your Financial Statement

It’s a good idea to request your own copy of your credit report before you meet
with any prospective lenders. That way, you’ll know what they will see and will be
prepared to discuss it. If your credit file contains some inaccurate or misleading
information, you have the right to challenge that information.
Most of the time, lenders will accept your estimates of your personal assets and
liabilities on your Personal Financial Statement, since it is a crime to knowingly make
false financial statements.
Banks will also verify your cash deposits by contacting the relevant institutions.
Also, lenders will want evidence of your title to property they take as security for a loan.

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THANKS!
ANY QUESTIONS?

Group 5: Narciso, Perez, Quitco, Sales, Saliao, Salimbangon

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