Beta:Forms of Short-term Financing/Preparing to Borrow Needed Funds

2008-11-26T14:28:12Z

196.0.21.132:

{{TF7.1}}

==Preparing to Borrow Needed Funds==
Financial statements must be available for internal and external purposes. The financial statements represent the company and tell the story of its history to others. Companies with good financial statements have a better chance of getting credit from all available sources. The better the financial statements are, the lower the credit risk is, creating more favorable [http://www.small-business-accounting-guide.com/business-financing.html financing options] for a buyer. To qualify for any financing option, a buyer will need to meet the requirements of the funding provider. The company’s financial plan determines what options will be available. Thus understanding and properly preparing a good [http://www.small-business-accounting-guide.com/small-business-plan.html financial plan] is primary.
It is not essential to understand a balance sheet in its entirety, but it does help to have an understanding of the relationships between some of the items listed on the balance sheet and income statement since lenders look very carefully at these relationships. The key matter is the relationship of the accounts receivable to sales and the transition to cash:
*Accounts receivable are a desirable asset. Banks and factors scrutinize these because accounts receivable provide collateral for the basis of a loan.
*Sales are the outcome of extending payment terms which then create accounts receivable.
*Inventory is decreased, and cost of sales is increased.
*Cash is generated when a buyer pays the obligation (accounts receivable).
*Sales are the primary goal, and profits are the desired end results.

The end result of the difference between sales and cost of sales is loss/ profit that flows into the company (debit if loss, credit if profit).

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[[Category:International Business]]

Resources for Developing a Financial Plan

2008-11-26T14:06:24Z

196.0.21.132:

{{TF6.1}}

==Unit 6.1- Resources for Developing a Financial Plan==

All forms of financing require financial data to be submitted and evaluated by the financier.

Financial planning demonstrates the ability based on historical data to forecast and project anticipated results. A financial plan is generally a key element of a more comprehensive business plan which covers all aspects of a company. Projections are made to see if the company can meet its objectives. The ability to understand and use the financial information contained in the plan gives outside sources, such as banks and investors, confidence. Without this understanding and confidence, an outside source will be reluctant to provide funding.

The balance sheet and income statement reveal the key financial data for a business. The two statements combined tell a story. A reader may find some aspects of these statements mysterious or confusing, and they will elicit questions that must be answered. The company’s ability to field and answer these questions to the satisfaction of that reader will determine the success of getting the financing required. The fewer the questions the better the chances are of getting funding from a bank or investor. Answering all questions does not, however, supersede the minimum requirements to become bankable: being in business for two years, having a positive net worth, and being a profitable company. These are not the only requirements; but without these at a minimum, a lender will ask for other assets or collateral. The balance sheet lists:
*Assets consisting of:
:*cash
:*inventory
:*accounts receivable
*Liabilities from:
:*accounts payable
:*short-term
:*long-term debt
*Equity reflecting the owners’ investment
:*all accumulated earnings

The [http://www.small-business-accounting-guide.com/small-business-plan.html business plan] and financial statements are prepared for internal use but are often presented to external entities to demonstrate the strength and expertise of a company. Presentation of a business plan is critical to gaining investor confidence.

Many factors may result in a company needing to borrow money. The ability to project these needs based on growth through a cash flow analysis or demonstrated through the planning process will convince outsiders to invest in the company. The profitability of the company should demonstrate the ability to provide a return on investment and/or pay back any debt incurred.

===Unit Objective===
The goal of this material is to introduce you to the resources available to aid companies in developing their financial plans for internal and external international trade financing.
By the end of this unit you will be able to
*describe the key components of a financial plan
*identify the key financial ratios
*identify key financial resources--the Ex-Im Bank, SBA, private banks, non-bank private sector lenders required to develop a financial plan
*identify advantages and disadvantages of each resource
*describe how to find these resources

===Unit Outline===
*[[Resources for Developing a Financial Plan|Introduction]]
*[[Resources for Developing a Financial Plan/A Financial Plan|A Financial Plan]]
*[[Resources for Developing a Financial Plan/Presentation and Customization|Presentation and Customization]]
*[[Resources for Developing a Financial Plan/Risk Assessment and Risk Management|Risk Assessment and Risk Management]]
*[[Resources for Developing a Financial Plan/How Do I Qualify?|How Do I Qualify?]]
*[[Resources for Developing a Financial Plan/Summary|Summary]]
*[[Resources for Developing a Financial Plan/Resources|Resources]]
*[[Resources for Developing a Financial Plan/Activities|Activities]]
*[[Resources for Developing a Financial Plan/Assessment|Assessment]]

===Resources===
[[Image:Calculating Cost.pdf]]

'''Correlation''': Materials from this unit correlate with [http://www.nasbitecgbp.org NASBITE CGCP]'s Knowledge Statement 04/06/01: Knowledge of resources (e.g., Ex-Im Bank, SBA, private banks, non-bank private sector lendors)

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[[Category:International Business]]

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Resources for Developing a Financial Plan