Enrique Romero UTPB Midland Energy Expo

1. Enrique V. Romero, Director
UTPB Small Business
Development Center

2. I. Finance Your Business
II. Types of Financing
III. Debt Financing
IV. Equity Financing
V. Grants
VI. The Business Plan

3. Four Questions You Should Be Able to Answer:
1. How much money do you need?
2. What will you use the money for?
3. Where will you find it?
4. How will you pay it back? (Lender), or
What is the rate of return on my investment?
(Investor)

4. 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.

5. • Debt financing is borrowing 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

6. • Equity financing is raising money in exchange for a share
of ownership in the business
• Equity financing 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
The most common source of equity funding comes from
private investors or venture capitalists.

7. 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

8. • 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

9. • The SBA programs that are currently available are loan
guarantees.
• The place to start is with your regular bank.
• You will have to get their commitment before the SBA
ever comes into the picture.
• Main advantage to an SBA loan guarantee is that it
extends the term of the loan, making the payments
smaller.
• Like any insurance program, the SBA guarantee fee
costs money.

10. • Express Loans - $20k to $150k
• Lenders Advantage – $150k to $350k
• SBA 7a - $350k to $5MM
• SBA 504 - $200k to $5MM

11. • The selling your invoices or accounts receivable for immediate
cash.
• Factoring 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

12. 4 C’s
1. Credit (Around 700 give or take)
2. Capital – Equity (Normally - 20% )
3. Collateral
4. Cash Flow
Conditions
Character

13. Management or Industry Experience?
Documents Needed:
 Business Plan
 Personal Financial Statement
 Personal and Business Tax Returns
 Resume

14.  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:
www.annualcreditreport.com.
 It is important to note that you CANNOT get the FICO score with
this report.
 Myfico.com (credit score website)

15. Large Banks
 Wells Fargo (2)
 CHASE (1)
 BB&T
 Bank of America
Regional Banks
 First Capital Bank (1)
 Prosperity Bank (2)
 BBVA
 Frost
Community Banks
• Southwest Bank (1)
• Community National Bank (2)
• Commercial State Bank (2)
• Security Bank

16. Credit Unions -
 First Basin Credit Union (1)
 Southwest Heritage Credit Union (2)
 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)

17. Short Term Loans
- OnDeck ($35k average)
- Kabbage
Long Term Loans
- Funding Circle
- Lending Club
- Fundation
Microlenders
- ACCION
- PeopleFund
Loan matching sites
- Boefly
- Fundera
- Lendio
Crowdfunding
- Kickstarter
- Indiegogo

18. 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

19. 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

20. • 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

21. • 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

22. • 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.

23. • The creative thought process involved forces a
critical, objective and non-emotional look at
the business.
• The completed plan provides a “road map” or
operating tool for managing the business and
lowering the risk of failure.
• The plan forms the basis for communicating
your ideas to others (i.e., lenders and investors)
in order to obtain financing for the business.

24. Table of Contents
I. Executive Summary
II. The Business Concept
III. The Marketing Plan
IV. The Operations Plan
V. The Financial Plan
VI. Appendix

25. Questions ?