How to Start a Business Part 3 -Sources of Capital
I have prepared feasibility studies (business plans)for businesses which capitalizations ranged from a few thousands to millions. Sources of
financing were no problem for incorporators/project proponents who were
already established businessmen who just would like to diversify in
terms of business holdings/exposure. If one industry becomes a sunset,
there are other businesses to which they can fall back on.
Let's go back to the restaurant business. This is the pro-forma
of the project cost:
Total Project Cost
Kitchen Equipment xxx
Dining Equipment xxx
Office Equipment xxx
Furnitures and Fixtures xxx
Leasehold Improvements xxx
Working Capital Requirements xxx
Organization Cost xxx
Total XXXX
The capitalization requirement depends on the capacity, type and image of the restaurant.
The capacity is expressed in terms of seating capacity. How many tables and chairs? Type. Will it be partly serve yourself,(turo-turo)order from the counter and bring the food to the table or waiters get and bring the orders to the customers?
Image of the restaurant refers to the profile of clients it would be catering to.
Sources Of Capital
1. You - This is on the assumption that this is single proprietorship.
2. Bank - The business cannot apply for a loan in the bank without the owner's use of collateral coming from the personal assets. There may be goverment program thru
foreign loan assistance that help small businesses if the project falls on this category.
(I've volunteered in one Church charity project helping people prepare simple project studies for small businesses with financing coming from the Charitable foundations).
3. Equipment Suppliers- If the equipment could be purchased on terms, then
the costs could be a deduction from the cash needed right away to open the
business. Credit cards of the sole proprietor could be tapped.
4. Relatives - if they are going to trust you. :)
5. Friends - We tapped our friends when we started the business which they thought would never take off. They may be friends but there is a need to promise something
in return to part with their savings. We promised 10 per cent. (When they saw
that it was a profitable business, they expressed their interest to convert the
loan to equity). And that is another story.
When people are convinced that there is a market and business success is guaranteed, there will be no problem of getting the needed capital.
Next: So how do you determine if there is a market ?
business plan,capital,financing,franchise
posted by cathy at 4:34 AM
