• Unit 5: Financing the New Venture

    Every entrepreneur needs money. It is imperative that you understand the costs of launching and maintaining a business, from start-up expenses to operating capital. The financial information and projections contained in a business plan are vital because they demonstrate the potential for profit and serve as the guideline for managing the business' financial aspects. This unit will teach you how to determine the costs for launching a new venture and where to get those funds. Additionally, you will learn to document the current financial status of the business and project future estimates. You will also examine options for securing financing or investors and partners to help capitalize the business.

    Completing this unit should take you approximately 21 hours.

    • Upon successful completion of this unit, you will be able to:

      • explain the importance of the financial plan; and
      • explain how to finance personal business ventures.

    • 5.1: The Financial Plan

      • Financing Your Organization URL

        This chapter will provide you with a proper foundation in the financial and accounting aspects of operating a business.

      • 5.1.1: Start-Up Costs

        • Can You Afford to Start Up? URL

          This section discusses how to identify various business start-up costs and how to calculate the capital that is needed to start a business.

      • 5.1.2: Personal Financial Statements

        • Financial Statements URL

          Read this section for information on the financial statements needed for business operations.

      • 5.1.3: Profit and Loss Statements

        • Standardizing Financial Statements File

          Read these lecture slides. You should be able to describe the different methods used for presenting data in a company's income statement. Attempt the review questions on slides 9 through 16.

      • 5.1.4: Projections

        • Finance and Forecasting Page

          Listen to this podcast, which discusses the basics of finance and forecasting, revenue projections, costs, and so on. 

      • 5.1.5: Break-Even Analysis

        • Break-Even Analysis Page

          The break-even point is the point at which costs and revenues are equal. By the end of this section, you should be able to analyze break-even points relative to pricing decisions.

    • 5.2: Investment/Lending Segments

      • Funding the Company Page

        Listen to this podcast, which discusses how much money a venture requires and how to raise that capital before comparing different funding sources.

      • Sources of Financing Page

        Read this article to find out about the several financial options entrepreneurs have to start up a business.

      • Financing Company Operations Page

        A company can be self-financed or financed through the solicitation and participation of outside investors. By the end of this article, you will be able to differentiate among different financing options for small businesses.

      • Starting a Small Business – Optional Quiz Page

        Attempt these review questions.

      • 5.2.1: Types of Lenders

      • 5.2.2: Banks

      • 5.2.3: Venture Capital

        • Venture Capital File

          Read through these lecture slides. Attempt the review questions on slides 11 through 16.

      • 5.2.4: Government Funding

        • Facts about Government Grants URL

          Read this page and explore the application forms. The small business administration clarifies the federal government's approach to grant financing. All grants have a great deal of reporting and compliance requirements. What does this mean to someone seeking a grant? There will be a great deal of paperwork associated with obtaining the grant. This also means there will be follow-up paperwork, providing insight on the use of the grant money. These requirements are in place because taxpayer dollars fund government grants. The federal government provides resources for individual states to provide more specialized assistance to individuals within their respective states. Each state has its own small business division, and the title of the division will vary by state.

      • 5.2.5: Barter

      • 5.2.6: Customer Financing

        • Customer Financing for Your Business URL

          As you read, consider the risks and rewards of financing a business using this strategy. Should this strategy be considered up-front, or should a business only make use of this strategy as a last resort? Which type of customer financing do you feel has the greatest risk? Which has the greatest reward? How would you react if, as a customer, you were approached by a business and asked to invest

        • Crowdfunding URL

          As you read this article, consider the risks to a business by taking this route for seeking financing. What about the goals of those who are investing? Is this something you would consider for yourself? Also, review the variety of industries that are making use of crowdfunding. What other industries might also benefit from this strategy?

      • 5.2.7: SBIR

      • 5.2.8: Asset-Based Lenders

        • Asset-Based Loans URL

          Asset-based loans are a business financing option that can be valuable to businesses that require short-term working capital.

      • 5.2.9: Angel Investors

        • Angel Investors and Your Business URL

          Read this article for tips on how to locate angel investors and how to know which angel investor is the right investor for your business.

    • 5.3: Managing Growth

    • 5.4: Exit Strategy

      • How Does a VC Think About Exit Strategy? URL

        This article discusses how venture capitalists evaluate the attractiveness of an investment possibility and how they determine when they will exit the company in which they have invested.

      • Exit Strategies URL

        This section covers the importance of developing a business' exit strategy at the launch of the business and explains the pros and cons of various exit strategy options.

      • How Do You Determine the Value of a Private Company? URL

        Read this article, which discusses various methods for evaluating the worth of a small company. This article also includes resources for determining a company's value.

      • Getting Out URL

        For a discussion of the concept of getting out of the business, read all seven articles: "Plan Your Exit", "Steps to Closing a Business", "Selling Your Business", "Transfer Ownership", "Legal Resources for Exiting", "Liquidating Assets", and "Filing for Bankruptcy Protection".

    • Unit 5 Assessment

      • Unit 5 Assessment Quiz

        Take this assessment to see how well you understood this unit.

        • This assessment does not count towards your grade. It is just for practice!
        • You will see the correct answers when you submit your answers. Use this to help you study for the final exam!
        • You can take this assessment as many times as you want, whenever you want.