Guaranteed Financing: DCV - Masters in Financing Franchise's
Financing Your Business - Westfair Communications · 2012. 10. 23. · Oh, that’s right: Money,...
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A MESSAGE FROM CITRIN COOPERMAN BY EDWARD H. ROBERTS, CPA CITRIN COOPERMAN You’ve wrien your business plan and completed your markeng plan. You’ve memorized your elevator pitch and registered your business under the appropriate busi- ness structure. Your product or ser- vice has been perfected and is ready for the market. Have you forgoen anything? Oh, that’s right: Money, Moolah, Scratch. Whatever you call it, your business needs capital! Financing is one of the most im- portant aspects of your business. The ability to raise adequate capital may determine the fate of your business. According to the U.S. Small Business Administraon, while poor manage- ment is cited most frequently as the reason businesses fail, inadequate financing is a close second. Many mes it comes down to cash flow – companies have closed their doors because they couldn’t connue operaons for another few months unl the money came in. Before you start, you must take a careful look at the type and amount of capital you need. Then, you must decide how you are going to finance the capital needs of the business. Last, but not least, you have to de- termine a source for the capital at an affordable cost. There are five quesons you should ask to determine how much capital is needed: • How much do I need to start the business? • Do I have personal funds/assets to finance the start-up phase? • Do I have family or friends who are willing to invest in the business? • Do I have personal credit that will allow me to obtain lines of credit? • Do I have relaonships with any financial instuons? There are two types of capital: START-UP: money needed to inially get the business on its feet – this might include capital for acquir- ing/leasing real estate equipment or for inventory. WORKING CAPITAL: money needed for the day-to-day operaon of your business. How much working capital you need depends on the type of business you have. Fundamentally, there are two types of business financing: DEBT FINANCING – borrow the money and agree to pay it back at a stated interest rate. Many businesses are funded with debt financing. If you pass the requirements of the lender, you may be able to obtain a term- loan or line of credit. Factoring can also be a debt financing soluon. Fac- toring is typically the most expensive opon but depending on your situa- on (new business, seasonal sales) it may be the best or only choice. • The benefits/detriments – you don’t have to give up ownership and it is available to companies that can’t get equity financing. However, you must pay interest, and the lender will likely require personal guarantees. EQUITY FINANCING – sell paral ownership of your company. While debt financing is most common, there are thousands of companies financed each year by private or “instuonal” investors in exchange for an equity ownership stake. They range from ‘friends-and-family’ to an- gel investors and venture capitalists. • The benefits/detriments – friends and family: convenient, no-nonsense and available quickly. However, be ready for an ugly Holi- day dinner if you lose their money. Angel investors: relavely paent about their investment, however oſten difficult to find. Venture capital- ists: investment smarts and network- ing in addion to money. Must be a start-up business that is interested in selling within 3-5 years, must be prepared to share control. Whether your business is consid- ering debt or equity financing, it is important to understand the factors that will affect a credit decision. These factors include: • Experience of management • Collateral • Industry • Ability to repay • Amount of funds required The choice of financing opons is one of the most important deci- sions you will make for your business. Review your opons and prepare your business properly so as to afford your- self the best opportunity to succeed. The next Citrin Cooperman Corner column will appear on this page, Monday, Aug. 6, 2012 dealing with Employee or Independent Contractor. About the Author: Ed Roberts, a partner in Citrin Cooperman’s White Plains office, has more than 30 years of experience in the accounng pro- fession. He has successfully consulted on financing opons for numerous businesses. Ed can be reached at: (914) 949-2990 or email: eroberts@ citrincooperman.com. Citrin Cooper- man is a full service accounng and consulng firm. Citrin Cooperman Corner Financing Your Business
Transcript of Financing Your Business - Westfair Communications · 2012. 10. 23. · Oh, that’s right: Money,...
A MESSAGE FROM CITRIN COOPERMAN
BY Edward H. roBErts, CPa Citrin CooPErman
You’ve written your business plan and completed your marketing plan. You’ve memorized your elevator pitch and registered your
business under the appropriate busi-ness structure. Your product or ser-vice has been perfected and is ready for the market. Have you forgotten anything?
Oh, that’s right: Money, Moolah, Scratch. Whatever you call it, your business needs capital!
Financing is one of the most im-portant aspects of your business. The ability to raise adequate capital may determine the fate of your business. According to the U.S. Small Business Administration, while poor manage-ment is cited most frequently as the reason businesses fail, inadequate financing is a close second. Many times it comes down to cash flow – companies have closed their doors because they couldn’t continue operations for another few months until the money came in.
Before you start, you must take a careful look at the type and amount of capital you need. Then, you must decide how you are going to finance the capital needs of the business. Last, but not least, you have to de-termine a source for the capital at an affordable cost.
There are five questions you should ask to determine how much capital is needed:
• How much do I need to start the business?
• Do I have personal funds/assets to finance the start-up phase?
• Do I have family or friends who are willing to invest in the business?
• Do I have personal credit that will allow me to obtain lines of credit?
• Do I have relationships with any financial institutions?
There are two types of capital:START-UP: money needed to
initially get the business on its feet – this might include capital for acquir-ing/leasing real estate equipment or for inventory.
WORKING CAPITAL: money needed for the day-to-day operation of your business. How much working capital you need depends on the type of business you have.
Fundamentally, there are two types of business financing:
DEBT FINANCING – borrow the money and agree to pay it back at a stated interest rate. Many businesses
are funded with debt financing. If you pass the requirements of the lender, you may be able to obtain a term-loan or line of credit. Factoring can also be a debt financing solution. Fac-toring is typically the most expensive option but depending on your situa-tion (new business, seasonal sales) it may be the best or only choice.
• The benefits/detriments – you don’t have to give up ownership and it is available to companies that can’t get equity financing. However, you must pay interest, and the lender will likely require personal guarantees.
EQUITY FINANCING – sell partial ownership of your company. While debt financing is most common, there are thousands of companies financed each year by private or “institutional” investors in exchange for an equity ownership stake. They range from ‘friends-and-family’ to an-gel investors and venture capitalists.
• The benefits/detriments – friends and family: convenient, no-nonsense and available quickly. However, be ready for an ugly Holi-day dinner if you lose their money. Angel investors: relatively patient about their investment, however often difficult to find. Venture capital-ists: investment smarts and network-ing in addition to money. Must be a start-up business that is interested in selling within 3-5 years, must be prepared to share control.
Whether your business is consid-ering debt or equity financing, it is important to understand the factors that will affect a credit decision. These factors include:
• Experience of management• Collateral• Industry• Ability to repay• Amount of funds requiredThe choice of financing options
is one of the most important deci-sions you will make for your business. Review your options and prepare your business properly so as to afford your-self the best opportunity to succeed.
The next Citrin Cooperman Corner column will appear on this page, Monday, Aug. 6, 2012 dealing with Employee or Independent Contractor.
About the Author: Ed Roberts, a partner in Citrin Cooperman’s White Plains office, has more than 30 years of experience in the accounting pro-fession. He has successfully consulted on financing options for numerous businesses. Ed can be reached at: (914) 949-2990 or email: [email protected]. Citrin Cooper-man is a full service accounting and consulting firm.
Citrin Cooperman CornerFinancing Your Business
