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Financing the ventures and start up operations.pdf

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anna liza manalo

This document discusses financing requirements for starting a new venture or business. It covers calculating initial startup costs such as office space, equipment, supplies, licenses and permits. It also discusses creating a monthly budget for recurring expenses like rent, salaries, utilities and supplies. The document outlines sources of financing including personal funds, family/friends, bootstrapping, equity financing from angels/venture capital, debt financing from banks, and government programs. Overall it provides an overview of determining capital needs and where entrepreneurs can obtain funding to start and sustain a new business until it becomes profitable.

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FINANCING THE VENTURES and START – UP OPERATIONS
PART 1 REPORT OBJECTIVES will cover the following: ➢Starting Small ➢Capital Requirements ➢Sources of Capital ➢Borrowing form Banks
Introduction New ventures need financing. As a new ventures are just starting off, they do not generate enough income to be able to pay for the up-front costs. Without sufficient funding, many brilliant ideas have met stumbling blocks and come to a sad end despite holding great potential.
Start Small •Many entrepreneurship advise starting small dreaming big. •Starting small allows the entrepreneur to learn gradually about the enterprise on a smaller scale while taking less risk. •Starting a small business, you may able to provide all the start-up money you will need. • The entrepreneur grows in knowledge and ability as the business develops and expands.
Capital Requirements •One of the critical factors in keeping a new venture alive. •This requires the preparation of a start – up budget that shows the financial requirements of the enterprise. •Start – up budget gives the entrepreneur an idea of how much capital is available to sustain the business until profit is realized. •The opportunities and ability of the new venture to raise capital will vary, depending on the form of business.
Calculating Initial Start – Up Cost 1. Determine whether to rent a business space, operate at home, or build a new place. 2. Take into account signage cost 3. Office furniture and equipment 4. Machinery and equipment or vehicles 5. Office stationery and supplies 6. Insurance cost 7. License and permit
Calculating Initial Start – Up Cost 8. Professional services 9. Initial materials and supplies inventory expense 10.Capital requirements for manufacturin g equipment and tools 11.Funds for advertising and promotion 12.Contingency fund 13.Unexpected expenses
Monthly Budget for Recurring Expenses 1. Rental payment 2. Mortgage payment 3. Inventory replacement 4. Labor and employees salaries 5. Lease payment 6. Interest payment 7. Bank charges 8. Insurance premium 9. Office supplies and stationery
Monthly Budget for Recurring Expenses 10.Repairs and maintenance expense 11.Cost of utilities 12.Suppliers bills 13.Sales taxes 14.Transport and delivery expense
Sources of Personal Financing Personal Financing ▪The seed money that gets a company off the ground comes from the founder’s own pocket Personal Funds •Personal Savings •Personal Property •Sweat Equity
Sources of Personal Financing Family and Friends •2nd source of funds for many new ventures • Form of loans or Investment •Outright Gift •Forgone or delayed compensation •Reduced or free rent Bootstrapping (minimizing start-up expenses) •Cost Cutting Technique •Money Saving Tactics
Financing the ventures and start up operations.pdf
Sources of Capital Two Basic Types of Financing ❖Equity Financing ➢Business angels ➢Initial Public Offering ➢Venture Capital ❖Debt Financing ➢Commercial Banks ➢Government Financing Program ➢Other Sources
Financing the ventures and start up operations.pdf
Sources of Capital Equity Financing – Entrepreneur sells portion of the business ownership. – It requires sharing of ownership and profits with the funding source. – Investors assume the risk of failure – Safer for new business ➢Common share ➢Preferred share
Sources of Equity Financing Business Angels •Informal risk capitalist •Wealthy individuals back up emerging entrepreneurial ventures with their own money and labor hopes of earning high profits when the ventures become successful •Hands on investors providing advice or direct management input
Sources of Equity Financing Initial Public Offering •First sale of stock by the firm to the public •Stock is traded on the stock exchanges/ Market •A firm is not able to go public until it has demonstrated that it is viable and has a bright future
Sources of Equity Financing Venture Capital •Rich individual investors or groups of investors provide venture capital firms in start-ups and small businesses with exceptional growth potential. •Investment of the venture capitalists are usually in cash in exchange for shares of stocks in the company for a longer time horizon
Sources of Equity Financing Venture Capital •Venture capitalist participate in business management through membership in the Board of Directors
Sources of Equity Financing Corporate Venture Capital • Venture capital firms are companies that invest money in small businesses operating in particular industries, in which they are familiar with and have high growth and profit potentials. Venture capital firms also look for business with competent management and competitive edge. In return, they expect a significant ownership interest in the business
Financing the ventures and start up operations.pdf
Sources of Capital Debt Financing ➢It involves a payback of the funds plus ]an interest for the use of money ➢It is stated as a liability in a company’s balance sheet.
Financing the ventures and start up operations.pdf
Sources of Debt Financing Commercial Banks – Major source of debt financing for small business – Offers secured and unsecured loans – Provides intermediate term loan
Commercial Banks Secured Loans – Line of Credit – Lend up to certain amount of money whenever the borrower needs it – Borrowers can use the credit at their discretion – Long-term Loan – Payable over a period longer than 1 year – Help business make improvements that will boost profits
Commercial Banks Secured Loans Accounts Receivable Financing – Bank loan a business up to 855 of the total value of its receivable – Interest rate is often higher Inventory Financing – Banks usually require that the value of the inventory be at lest double the amount of the loan
Government Financing Program •The government has a variety of financing programs for small businesses. The range of financial assistance rendered aims to help SMEs improve their workforce, develop products or technology, promote their product or services and restructure their debts. •Government institutions •DBP, LBP, BSP & IGLF
Other Sources Trade credit •Vendors can extend their credit in the form of delayed payment. Microcredit Institutions •Available to entrepreneurs who do not have collaterals to put up •Center for Agriculture and Rural Developme nt Inc.,(CARD) •Landless People’s Development Fund (LPDF) •Tulay sa Pag-unlad inc., (TSPI_
END OF PART 1 THANK YOU!
PART 2 REPORT OBJECTIVES will cover the following: ➢Gearing Up ➢Registering Before Start-Up ➢Choice of Business Name ➢Money Saving Options at Start-Up ➢The Instance Office
Gearing Up: Critical Factors for Starting a New Enterprise What are the factors that influenced someone to embark on an entrepreneurial career? Personal Attributes & Environment
PERSONAL CHARACTERISTICS FOUND IN MOST ENTREPRENEUR DREAMER AND VISIONARY Entrepreneurs have a vision of what the future could be like for them and their business. DOERS Once they decide on a course of action, they implement it as quickly as possible. And, more important, they have the ability to implement their dreams. Decisiveness They don’t procrastinate. They made decision swiftly. Their swiftness is a key factor in their success.
DETERMINATION They implement their ventures with total commitment. They seldom give up, even confronted with obstacles that is seem insurmountable. DEDICATION They are totally dedicated to their business, sometimes at considerable cost to their relationship with their friends and families. They work tirelessly. Twelve hours a day, seven day work weeks are not uncommon when entrepreneurs is striving to get a business off the ground. DEVOTION Entrepreneurs love and had the passion on what they do. And it is love for their product or service that makes them so effective in selling it.
DETAILS It is said that the devil resides in details. That is never more true than starting and growing a business. The entrepreneur must be on top of the critical details. DESTINY Entrepreneurs have a higher locus of control than non- entrepreneurs, which means they have a higher desire to be in control of their own fate. They want to be in charge of their own destiny rather than dependent with their employer. NON-MONETARY REWARD Getting rich is not the prime motivator of entrepreneurs. They assume that if they are successful they will be rewarded.
ENVIRONMENTAL FACTORS ROLE MODELS Knowing successful entrepreneurs makes the act of be- coming one yourself. Close relative who is an entre- preneur, it is also more likely that you will have the same desire to do so. FAMILY INFLUENCE Entrepreneurs, specially the young practitioners are influenced by their families. Family play an important role in the decision whether to start a company. A 25 years old, single, and without personal dependents can be easily encourage to venture into business rather than the 45 years old individual, married, and with children and other domestic obligations.
PRESENCE OF GOVERNMENT SUPPORT A rigid and consistent government campaign to encourage individual to venture into business is highly considerable. Government economic programs that promises to provide technical and financial support to local entrepreneurs is an opportunity to take. COMMUNITY NEEDS The community is the primary environment of which an entrepreneur serve. Being sensitive with your community needs may lead an individual into an entrepreneurial venture. It is also an opportunity to create a community based business.
PERSONAL AND ENVIRONMENTAL FACTORS AVAILABILITY OF RAW MATERIALS The abundance of raw materials needed to produce may lead an individual to create new products to offer. It may also lead to the creation and development of new methodologies of production. The possibility of technical advancement and innovation in manufacturing is also very high. What are the factors that influenced someone to embark on an entrepreneurial career? Q and A
EVALUATING OPPORTUNITIES FOR NEW BUSINESS Opportunity Entrepreneur Resources THE BUSINESS PLAN Fig. 1: Three critical component for a successful new business. Source: Jeffrey A. Timmons, New Venture Creation (Homewood, IL. 1990)
THE THREE CRITICAL COMPONENTS FOR A SUCCESSFUL NEW BUSINESS OPPORTUNITY - Is a chance when you see one and having the skills to convert that opportunity into a thriving business. Unique Idea - A unique idea with no comparison to another is always an advantage. - It’s a guaranteed – “NO COMPETITOR “. So, you win! - However there is also a misconception about an idea that it must be unique. Once they believed they had it they are haunted by the thought that someone is just waiting to steal it from them. They become secretive and reluctant to discuss it with anyone else. This stops them from moving forward. “Developing the idea, implementing it, and building a successful business are important aspects of entrepreneurship.”
Customer Need - The most telling question is “ Can you give me names of prospective customers?” If they are unable to name several customers then they simply have an idea, not a market. There is NO MARKET unless customers have a REAL NEED of the product – a proven need rather than hypothetical need. “Would be entrepreneur who are unable to name customers are not ready to start a business. They have only found an idea and have not yet identified the market.” Timing - Time plays a crucial role in many potential oppor- tunities. To do that, one must be prepared. Luck is where preparations and opportunity meet. - Entrepreneurs should avoid “Fads” or any window of opportunity that occur only in a brief of time. Consumer fad will quickly pass. “Rushing to open a business without adequate planning can lead to costly mistakes.”
ENTREPRENEUR First, entrepreneurs should have the experience in the same industry or a similar one. Starting a business is very demanding and there is no time for on-the-job-training. Second, management experience, preferably with responsibility for budgets or better yet accountability for profit and loss. Recording of inventories, increasing sales and the ability to control utilities cost. Third, The Management Team. Working with the right people with skills and talent is always an asset to any business venture. Develo- ping good relationship will foster loyalty, honesty and trust. The practice of good business etiquette thru adherence of professional ethics and office morals would strengthen organizational standards and its integrity.
RESOURCES Successful Entrepreneurs are FRUGAL with their resources. Entrepreneurial frugality includes: ➢LOW OVERHEAD ➢HIGH PRODUCTIVITY ➢MINIMAL OWNERSHIP OF CAPITAL ASSETS They keep overheads low, productivity high, and ownership of capital assets to a minimum. By doing so, they minimize the amount of capital they need to start their business and make it grow.
STEPS IN REGISTERING YOUR BUSINESS 4 major steps in Registering your Business in the Philippines Step 1 - Business Entity Registration Step 2 - Business Permit Step 3 - Register with the Bureau of Internal Revenue (BIR) Step 4 – Other Requirements
Step 1 - Business Entity Registration If Sole Proprietorship: • Register with the Department of Trade and Industry (DTI) If Partnership / Corporation: • Register with the Securities and Exchange Commission (SEC) If Cooperative: • Register with the Cooperative Development Authority (CDA)
REQUIREMENTS FOR REGISTERING WITH THE DEPARTMENT OF TRADE AND INDUSTRY (DTI) – SOLE PROPRIETORSHIP. Acquire Business Name Registration Certificate • File : Business Registration Application Form • Where : DTI-Provincial Office where the business is located or log on to www.bnrs.dti.gov.ph or http://www.business.gov.ph/ Validity : 5 years Requirements: • Presentation of 1 copy of government issued ID • Accomplished Business Name Registration form (BTRCP FORM 16A) in duplicate • Registration fee depending on territorial coverage of the business name and documentary stamp : Barangay – P 200.00 Municipal – 500.00 Regional – 1,000.00 National – 2,000.00 Documentary Stamp tax of P15.00 per application.
Sample (portion only) Business Registration Application Form for Sole Proprietorship (form is downloadable online.)
REQUIREMENTS FOR REGISTERING WITH THE SECURITIES AND EXCHANGE COMMISSION (SEC) - For Partnerships and Corporations • Secure SEC Registration Certificate Where : SEC Building, EDSA, Greenhills Mandaluyong City Tel. No. : (632) 584.0923 Email : mis@sec.gov.ph Website : www.sec.gov.ph or http://www.sec.gov.ph/secireg.htm (for online registration) Validity : 50 years Requirements for Partnership: . Name Verification Slip (online or at the name Verification Unit) . Articles of Partnership . Written Undertaking to Change Corporate Name by any partner . Form F-105 for partnership with Foreign Equity . Proof of Inward Remittance by foreign partners
Requirements for Stock (S) and Non Stock (NS) Corporations: . Verification Slip Form (S) (NS) . Articles of Incorporation (S) (NS) . Treasurer’s Affidavit (S) . Notarized Bank Certificate of Deposit where the bank is located . Written Undertaking to Change Corporate Name by any Incorporator or Director (S), by any Trustee (NS) . Clearance from other government agencies (S) . Foreign Investment Application Form F-100 (for subsidiaries of foreign corporations (S) . Proof of Inward Remittance by Non-Resident Aliens/Subscribers (S) . List of members and amount contributed certified by the Secretary and Treasurer (NS) . Registration fee of Php 360.00
REQUIREMENTS FOR REGISTERING WITH THE COOPERATIVE DEVELOPMENT AUTHORITY (CDA)- For Cooperatives Secure Certificate of Registration with the CDA Where : 6th Floor, Ben-Lor Building, 1184 Quezon Avenue, Quezon City (or at Municipality Local Office) Tel. No.: (632) 372.3808 / 373.6895 / 332.0019 Email: webmaster@cda.gov.ph Website: www.cda.gov.ph Requirements: . Economic Survey (4 copies) . By-Laws and Articles of Cooperation duly notarized ( available at CDA office) – 4 copies . At least 15 members . Undertaking to change name . Undertaking to submit reportorial requirements . Bond of accountable officers
Cooperative Pre-membership Education Seminar Certification . Favorable endorsement of proper government agency, if necessary . Capitalization of at least Php 15,000.00 (total paid-up capital) . Cooperative Annual Performance Report and audited financial statements for them to secure a certificate of good standing
Step 2 - Business Permit Apply for business permit and license from the City/Municipality where the business is to be located. Get sector specific clearances: For Example: Travel Agency – Department of Tourism (DOT) Food and Cosmetics – Food and Drugs Administration (F DA) Pawnshop – Bangko Sentral ng Pilipinas (BSP) Learning Centers – Department of Education (DepEd) Wood Crafts/Furnitures – Department of Environment and Natural Resources (DENR)
REGISTERING WITH THE MUNICIPALITY / LOCAL GOVERNMENT UNITS (Follow steps 1 and 2 of the Process Flow before registering with your Municipality) Mayor’s Permit Where : Municipality or City where the business is located Validity : 1 year Requirements: – DTI or SEC Registration – Certificate / Articles of Incorporation – Community Tax Certificate – Barangay Clearance – Location Clearance – Certificate of Occupancy – Building Permit – Fire Safety / Inspection Permit – Electrical Inspection Certificate – Contract of Lease – Picture / Sketch of the Site – Public Liability Insurance (for restaurants, mall, cinemas) – SSS Registration
Step 3 - Register with the Bureau of Internal Revenue (BIR) Register with the Bureau of Internal Revenue (BIR) District Office where the business is to be located for Authority to Print Invoice and Book of Journal REGISTERING WITH THE BUREAU OF INTERNAL REVENUE (BIR) (Follow steps 1 and 2 of the Process Flow before registering with the BIR) Tax Identification Number (TIN) Authority to Print Invoice and Book of Journal Where : BIR Provincial Office where the business is located or go to the BIR Revenue District Office Trunklines : (632) 981.7000 / 981.8888 E-mail: contact_us@cctr.bir.gov.ph Website: www.bir.gov.ph Validity: 1 year
Requirements: 1. Application for Tax Identification Numbers (TIN) for Employers a) Self Employed/Mixed Income Individual (BIR Form 1901) • Birth Certificate or any valid ID showing name, address and birth date • Mayor’s Permit or application for Mayor’s Permit • DTI Certificate of Registration of Business Name b) For Partnerships and Corporations (BIR Form 1903) • SEC Certificate of Registrations for Partnerships and Corporation • License to do business in the Philippines (in case of residence foreign corporation) • Mayor’s Permit or Application for Mayor’s permit 2. Application for Authority to Print Receipts and Invoices a) For New Taxpayers (BIR Form 1906) • Job Order • Final and Clear Sample of Receipts and Invoices (machine printed) • Photocopy of BIR Form 1901 or 1903, TIN Card, Proof of Payment (BIR Form 0605) b) For Registered Taxpayers (BIR Form 1906) • Job Order • Final and clear sample of receipts and invoices • Photocopy of Proof of Payment (BIR Form 0605, previously approved Authority to Print Invoice (ATP), Certificate of Registration (COR) BIR Form 2303, last booklet printed
Step 4 – Other Requirements Register your business with the following offices to comply with existing regulations: – Social Security System (SSS) – Department of Labor and Employment (DOLE) – PhilHealth – PAG – IBIG – Department of Environment and Natural Resources (DENR) Q and A “What is the second step in registering business in the Philippines?” Step 2 - Business Permit
CHOICE OF BUSINESS NAME What to remember in the choice of business name? ➢ The choice of business name is a matter of personal choice. ➢ The entrepreneur must take care to choose a name that will not be confused with the name of other business. ➢ Some companies have compiled database that contain the names of wide range of entities and products. Entrepreneurs can do the same. ➢ The most effective form of protection is registration. Have the business name, logo, slogan, trademark be registered. ➢ Understand what is intellectual properties, patents, inventorship, copyright and have it registered.
MONEY SAVINGS OPTION AT START-UP ✓ BANKING! Always consider banking. That is exactly their pur pose. Build good relationship and partner with a reputable bank of your choice. ✓ Experienced entrepreneurs understands that “Cash is King!” . Cash is needed for current growth and to prepare for future growth. ✓ Improve Cash Flows. Improved cash flows can better avoid the crisis of being cash out. ✓ Credit. Credit on loanable amount needed. This will give you the ability to cope up with your financial obligations. ✓ Avoid reluctant or expensive lenders or investors.
✓ Trade Credit. Trade Credit is essential. Raw materials for your production can be sourced out thru trade credit. Credit is extended to you by your suppliers who let you buy now and pay later. This will lengthen the use of your available cash. ✓ Finance internally by reducing the operating cash cycle or increa- sing margins. To reduce the operating cash cycle entrepreneurs adopt a “collect early, pay late” focus. Examples of these are: - Obtain partial payments from customers - Provide discounts for customers cash or early payments - Maintain good collection policy - Negotiate better payment terms with your suppliers ✓ Determine what a customer will pay for a product – rather than set a price based on covering cost and allowance for profit. ✓ Conserve cash to reduce high inventory levels and cash balances ✓ Keep your inventory moving.
THE INSTANT OFFICE ✓ Home Office. There is no better office than your own home. Home office provide you all the flexibility you want. Not to mention how much money you save from renting one. ✓ Consider single desk office space. This is ideal if the location of your business is within the city. Though you might still be paying rent but there is a lot of option to choose from. Remember, the bigger the space the higher the price. Choose an office space that is appropriate to your office needs. ✓ The Virtual Office. A virtual office provides address (and sometimes communication) services for a fee, without providing dedicated office space. It differs from "office business centers" or "executive suites", which do provide physical office space and/or meeting rooms.
What is best of having a virtual office? - It is a combination of technical innovation and information age. - It blends in at home and work to gain efficiencies in both - Office expenses are low, while the user’s professionalism retains the image of a traditional, high cost office. - Office users reduces environment impact, as well as the negatives of daily commute. - It can allow low-cost expansion without long term commitments. - eliminate the traditional burden of health care, records, payroll, insurance & rent. Also, traditional time off (sick days, vacations, personal leaves, etc.) does not apply to virtual staff. ✓ Executive Business Centers. Which provides physical office space (it could be a whole building floor) and meeting rooms. An onsite amenities are provided for employees and allows room for socialization among workers. However it is a high cost lease and requires long term commitment. Not ideal office for start-ups.
- END - THANK YOU!!
Financing the ventures and start up operations.pdf
Financing the ventures and start up operations.pdf

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Financing the ventures and start up operations.pdf

  • 1. FINANCING THE VENTURES and START – UP OPERATIONS
  • 2. PART 1 REPORT OBJECTIVES will cover the following: ➢Starting Small ➢Capital Requirements ➢Sources of Capital ➢Borrowing form Banks
  • 3. Introduction New ventures need financing. As a new ventures are just starting off, they do not generate enough income to be able to pay for the up-front costs. Without sufficient funding, many brilliant ideas have met stumbling blocks and come to a sad end despite holding great potential.
  • 4. Start Small •Many entrepreneurship advise starting small dreaming big. •Starting small allows the entrepreneur to learn gradually about the enterprise on a smaller scale while taking less risk. •Starting a small business, you may able to provide all the start-up money you will need. • The entrepreneur grows in knowledge and ability as the business develops and expands.
  • 5. Capital Requirements •One of the critical factors in keeping a new venture alive. •This requires the preparation of a start – up budget that shows the financial requirements of the enterprise. •Start – up budget gives the entrepreneur an idea of how much capital is available to sustain the business until profit is realized. •The opportunities and ability of the new venture to raise capital will vary, depending on the form of business.
  • 6. Calculating Initial Start – Up Cost 1. Determine whether to rent a business space, operate at home, or build a new place. 2. Take into account signage cost 3. Office furniture and equipment 4. Machinery and equipment or vehicles 5. Office stationery and supplies 6. Insurance cost 7. License and permit
  • 7. Calculating Initial Start – Up Cost 8. Professional services 9. Initial materials and supplies inventory expense 10.Capital requirements for manufacturin g equipment and tools 11.Funds for advertising and promotion 12.Contingency fund 13.Unexpected expenses
  • 8. Monthly Budget for Recurring Expenses 1. Rental payment 2. Mortgage payment 3. Inventory replacement 4. Labor and employees salaries 5. Lease payment 6. Interest payment 7. Bank charges 8. Insurance premium 9. Office supplies and stationery
  • 9. Monthly Budget for Recurring Expenses 10.Repairs and maintenance expense 11.Cost of utilities 12.Suppliers bills 13.Sales taxes 14.Transport and delivery expense
  • 10. Sources of Personal Financing Personal Financing ▪The seed money that gets a company off the ground comes from the founder’s own pocket Personal Funds •Personal Savings •Personal Property •Sweat Equity
  • 11. Sources of Personal Financing Family and Friends •2nd source of funds for many new ventures • Form of loans or Investment •Outright Gift •Forgone or delayed compensation •Reduced or free rent Bootstrapping (minimizing start-up expenses) •Cost Cutting Technique •Money Saving Tactics
  • 13. Sources of Capital Two Basic Types of Financing ❖Equity Financing ➢Business angels ➢Initial Public Offering ➢Venture Capital ❖Debt Financing ➢Commercial Banks ➢Government Financing Program ➢Other Sources
  • 15. Sources of Capital Equity Financing – Entrepreneur sells portion of the business ownership. – It requires sharing of ownership and profits with the funding source. – Investors assume the risk of failure – Safer for new business ➢Common share ➢Preferred share
  • 16. Sources of Equity Financing Business Angels •Informal risk capitalist •Wealthy individuals back up emerging entrepreneurial ventures with their own money and labor hopes of earning high profits when the ventures become successful •Hands on investors providing advice or direct management input
  • 17. Sources of Equity Financing Initial Public Offering •First sale of stock by the firm to the public •Stock is traded on the stock exchanges/ Market •A firm is not able to go public until it has demonstrated that it is viable and has a bright future
  • 18. Sources of Equity Financing Venture Capital •Rich individual investors or groups of investors provide venture capital firms in start-ups and small businesses with exceptional growth potential. •Investment of the venture capitalists are usually in cash in exchange for shares of stocks in the company for a longer time horizon
  • 19. Sources of Equity Financing Venture Capital •Venture capitalist participate in business management through membership in the Board of Directors
  • 20. Sources of Equity Financing Corporate Venture Capital • Venture capital firms are companies that invest money in small businesses operating in particular industries, in which they are familiar with and have high growth and profit potentials. Venture capital firms also look for business with competent management and competitive edge. In return, they expect a significant ownership interest in the business
  • 22. Sources of Capital Debt Financing ➢It involves a payback of the funds plus ]an interest for the use of money ➢It is stated as a liability in a company’s balance sheet.
  • 24. Sources of Debt Financing Commercial Banks – Major source of debt financing for small business – Offers secured and unsecured loans – Provides intermediate term loan
  • 25. Commercial Banks Secured Loans – Line of Credit – Lend up to certain amount of money whenever the borrower needs it – Borrowers can use the credit at their discretion – Long-term Loan – Payable over a period longer than 1 year – Help business make improvements that will boost profits
  • 26. Commercial Banks Secured Loans Accounts Receivable Financing – Bank loan a business up to 855 of the total value of its receivable – Interest rate is often higher Inventory Financing – Banks usually require that the value of the inventory be at lest double the amount of the loan
  • 27. Government Financing Program •The government has a variety of financing programs for small businesses. The range of financial assistance rendered aims to help SMEs improve their workforce, develop products or technology, promote their product or services and restructure their debts. •Government institutions •DBP, LBP, BSP & IGLF
  • 28. Other Sources Trade credit •Vendors can extend their credit in the form of delayed payment. Microcredit Institutions •Available to entrepreneurs who do not have collaterals to put up •Center for Agriculture and Rural Developme nt Inc.,(CARD) •Landless People’s Development Fund (LPDF) •Tulay sa Pag-unlad inc., (TSPI_
  • 29. END OF PART 1 THANK YOU!
  • 30. PART 2 REPORT OBJECTIVES will cover the following: ➢Gearing Up ➢Registering Before Start-Up ➢Choice of Business Name ➢Money Saving Options at Start-Up ➢The Instance Office
  • 31. Gearing Up: Critical Factors for Starting a New Enterprise What are the factors that influenced someone to embark on an entrepreneurial career? Personal Attributes & Environment
  • 32. PERSONAL CHARACTERISTICS FOUND IN MOST ENTREPRENEUR DREAMER AND VISIONARY Entrepreneurs have a vision of what the future could be like for them and their business. DOERS Once they decide on a course of action, they implement it as quickly as possible. And, more important, they have the ability to implement their dreams. Decisiveness They don’t procrastinate. They made decision swiftly. Their swiftness is a key factor in their success.
  • 33. DETERMINATION They implement their ventures with total commitment. They seldom give up, even confronted with obstacles that is seem insurmountable. DEDICATION They are totally dedicated to their business, sometimes at considerable cost to their relationship with their friends and families. They work tirelessly. Twelve hours a day, seven day work weeks are not uncommon when entrepreneurs is striving to get a business off the ground. DEVOTION Entrepreneurs love and had the passion on what they do. And it is love for their product or service that makes them so effective in selling it.
  • 34. DETAILS It is said that the devil resides in details. That is never more true than starting and growing a business. The entrepreneur must be on top of the critical details. DESTINY Entrepreneurs have a higher locus of control than non- entrepreneurs, which means they have a higher desire to be in control of their own fate. They want to be in charge of their own destiny rather than dependent with their employer. NON-MONETARY REWARD Getting rich is not the prime motivator of entrepreneurs. They assume that if they are successful they will be rewarded.
  • 35. ENVIRONMENTAL FACTORS ROLE MODELS Knowing successful entrepreneurs makes the act of be- coming one yourself. Close relative who is an entre- preneur, it is also more likely that you will have the same desire to do so. FAMILY INFLUENCE Entrepreneurs, specially the young practitioners are influenced by their families. Family play an important role in the decision whether to start a company. A 25 years old, single, and without personal dependents can be easily encourage to venture into business rather than the 45 years old individual, married, and with children and other domestic obligations.
  • 36. PRESENCE OF GOVERNMENT SUPPORT A rigid and consistent government campaign to encourage individual to venture into business is highly considerable. Government economic programs that promises to provide technical and financial support to local entrepreneurs is an opportunity to take. COMMUNITY NEEDS The community is the primary environment of which an entrepreneur serve. Being sensitive with your community needs may lead an individual into an entrepreneurial venture. It is also an opportunity to create a community based business.
  • 37. PERSONAL AND ENVIRONMENTAL FACTORS AVAILABILITY OF RAW MATERIALS The abundance of raw materials needed to produce may lead an individual to create new products to offer. It may also lead to the creation and development of new methodologies of production. The possibility of technical advancement and innovation in manufacturing is also very high. What are the factors that influenced someone to embark on an entrepreneurial career? Q and A
  • 38. EVALUATING OPPORTUNITIES FOR NEW BUSINESS Opportunity Entrepreneur Resources THE BUSINESS PLAN Fig. 1: Three critical component for a successful new business. Source: Jeffrey A. Timmons, New Venture Creation (Homewood, IL. 1990)
  • 39. THE THREE CRITICAL COMPONENTS FOR A SUCCESSFUL NEW BUSINESS OPPORTUNITY - Is a chance when you see one and having the skills to convert that opportunity into a thriving business. Unique Idea - A unique idea with no comparison to another is always an advantage. - It’s a guaranteed – “NO COMPETITOR “. So, you win! - However there is also a misconception about an idea that it must be unique. Once they believed they had it they are haunted by the thought that someone is just waiting to steal it from them. They become secretive and reluctant to discuss it with anyone else. This stops them from moving forward. “Developing the idea, implementing it, and building a successful business are important aspects of entrepreneurship.”
  • 40. Customer Need - The most telling question is “ Can you give me names of prospective customers?” If they are unable to name several customers then they simply have an idea, not a market. There is NO MARKET unless customers have a REAL NEED of the product – a proven need rather than hypothetical need. “Would be entrepreneur who are unable to name customers are not ready to start a business. They have only found an idea and have not yet identified the market.” Timing - Time plays a crucial role in many potential oppor- tunities. To do that, one must be prepared. Luck is where preparations and opportunity meet. - Entrepreneurs should avoid “Fads” or any window of opportunity that occur only in a brief of time. Consumer fad will quickly pass. “Rushing to open a business without adequate planning can lead to costly mistakes.”
  • 41. ENTREPRENEUR First, entrepreneurs should have the experience in the same industry or a similar one. Starting a business is very demanding and there is no time for on-the-job-training. Second, management experience, preferably with responsibility for budgets or better yet accountability for profit and loss. Recording of inventories, increasing sales and the ability to control utilities cost. Third, The Management Team. Working with the right people with skills and talent is always an asset to any business venture. Develo- ping good relationship will foster loyalty, honesty and trust. The practice of good business etiquette thru adherence of professional ethics and office morals would strengthen organizational standards and its integrity.
  • 42. RESOURCES Successful Entrepreneurs are FRUGAL with their resources. Entrepreneurial frugality includes: ➢LOW OVERHEAD ➢HIGH PRODUCTIVITY ➢MINIMAL OWNERSHIP OF CAPITAL ASSETS They keep overheads low, productivity high, and ownership of capital assets to a minimum. By doing so, they minimize the amount of capital they need to start their business and make it grow.
  • 43. STEPS IN REGISTERING YOUR BUSINESS 4 major steps in Registering your Business in the Philippines Step 1 - Business Entity Registration Step 2 - Business Permit Step 3 - Register with the Bureau of Internal Revenue (BIR) Step 4 – Other Requirements
  • 44. Step 1 - Business Entity Registration If Sole Proprietorship: • Register with the Department of Trade and Industry (DTI) If Partnership / Corporation: • Register with the Securities and Exchange Commission (SEC) If Cooperative: • Register with the Cooperative Development Authority (CDA)
  • 45. REQUIREMENTS FOR REGISTERING WITH THE DEPARTMENT OF TRADE AND INDUSTRY (DTI) – SOLE PROPRIETORSHIP. Acquire Business Name Registration Certificate • File : Business Registration Application Form • Where : DTI-Provincial Office where the business is located or log on to www.bnrs.dti.gov.ph or http://www.business.gov.ph/ Validity : 5 years Requirements: • Presentation of 1 copy of government issued ID • Accomplished Business Name Registration form (BTRCP FORM 16A) in duplicate • Registration fee depending on territorial coverage of the business name and documentary stamp : Barangay – P 200.00 Municipal – 500.00 Regional – 1,000.00 National – 2,000.00 Documentary Stamp tax of P15.00 per application.
  • 46. Sample (portion only) Business Registration Application Form for Sole Proprietorship (form is downloadable online.)
  • 47. REQUIREMENTS FOR REGISTERING WITH THE SECURITIES AND EXCHANGE COMMISSION (SEC) - For Partnerships and Corporations • Secure SEC Registration Certificate Where : SEC Building, EDSA, Greenhills Mandaluyong City Tel. No. : (632) 584.0923 Email : mis@sec.gov.ph Website : www.sec.gov.ph or http://www.sec.gov.ph/secireg.htm (for online registration) Validity : 50 years Requirements for Partnership: . Name Verification Slip (online or at the name Verification Unit) . Articles of Partnership . Written Undertaking to Change Corporate Name by any partner . Form F-105 for partnership with Foreign Equity . Proof of Inward Remittance by foreign partners
  • 48. Requirements for Stock (S) and Non Stock (NS) Corporations: . Verification Slip Form (S) (NS) . Articles of Incorporation (S) (NS) . Treasurer’s Affidavit (S) . Notarized Bank Certificate of Deposit where the bank is located . Written Undertaking to Change Corporate Name by any Incorporator or Director (S), by any Trustee (NS) . Clearance from other government agencies (S) . Foreign Investment Application Form F-100 (for subsidiaries of foreign corporations (S) . Proof of Inward Remittance by Non-Resident Aliens/Subscribers (S) . List of members and amount contributed certified by the Secretary and Treasurer (NS) . Registration fee of Php 360.00
  • 49. REQUIREMENTS FOR REGISTERING WITH THE COOPERATIVE DEVELOPMENT AUTHORITY (CDA)- For Cooperatives Secure Certificate of Registration with the CDA Where : 6th Floor, Ben-Lor Building, 1184 Quezon Avenue, Quezon City (or at Municipality Local Office) Tel. No.: (632) 372.3808 / 373.6895 / 332.0019 Email: webmaster@cda.gov.ph Website: www.cda.gov.ph Requirements: . Economic Survey (4 copies) . By-Laws and Articles of Cooperation duly notarized ( available at CDA office) – 4 copies . At least 15 members . Undertaking to change name . Undertaking to submit reportorial requirements . Bond of accountable officers
  • 50. Cooperative Pre-membership Education Seminar Certification . Favorable endorsement of proper government agency, if necessary . Capitalization of at least Php 15,000.00 (total paid-up capital) . Cooperative Annual Performance Report and audited financial statements for them to secure a certificate of good standing
  • 51. Step 2 - Business Permit Apply for business permit and license from the City/Municipality where the business is to be located. Get sector specific clearances: For Example: Travel Agency – Department of Tourism (DOT) Food and Cosmetics – Food and Drugs Administration (F DA) Pawnshop – Bangko Sentral ng Pilipinas (BSP) Learning Centers – Department of Education (DepEd) Wood Crafts/Furnitures – Department of Environment and Natural Resources (DENR)
  • 52. REGISTERING WITH THE MUNICIPALITY / LOCAL GOVERNMENT UNITS (Follow steps 1 and 2 of the Process Flow before registering with your Municipality) Mayor’s Permit Where : Municipality or City where the business is located Validity : 1 year Requirements: – DTI or SEC Registration – Certificate / Articles of Incorporation – Community Tax Certificate – Barangay Clearance – Location Clearance – Certificate of Occupancy – Building Permit – Fire Safety / Inspection Permit – Electrical Inspection Certificate – Contract of Lease – Picture / Sketch of the Site – Public Liability Insurance (for restaurants, mall, cinemas) – SSS Registration
  • 53. Step 3 - Register with the Bureau of Internal Revenue (BIR) Register with the Bureau of Internal Revenue (BIR) District Office where the business is to be located for Authority to Print Invoice and Book of Journal REGISTERING WITH THE BUREAU OF INTERNAL REVENUE (BIR) (Follow steps 1 and 2 of the Process Flow before registering with the BIR) Tax Identification Number (TIN) Authority to Print Invoice and Book of Journal Where : BIR Provincial Office where the business is located or go to the BIR Revenue District Office Trunklines : (632) 981.7000 / 981.8888 E-mail: contact_us@cctr.bir.gov.ph Website: www.bir.gov.ph Validity: 1 year
  • 54. Requirements: 1. Application for Tax Identification Numbers (TIN) for Employers a) Self Employed/Mixed Income Individual (BIR Form 1901) • Birth Certificate or any valid ID showing name, address and birth date • Mayor’s Permit or application for Mayor’s Permit • DTI Certificate of Registration of Business Name b) For Partnerships and Corporations (BIR Form 1903) • SEC Certificate of Registrations for Partnerships and Corporation • License to do business in the Philippines (in case of residence foreign corporation) • Mayor’s Permit or Application for Mayor’s permit 2. Application for Authority to Print Receipts and Invoices a) For New Taxpayers (BIR Form 1906) • Job Order • Final and Clear Sample of Receipts and Invoices (machine printed) • Photocopy of BIR Form 1901 or 1903, TIN Card, Proof of Payment (BIR Form 0605) b) For Registered Taxpayers (BIR Form 1906) • Job Order • Final and clear sample of receipts and invoices • Photocopy of Proof of Payment (BIR Form 0605, previously approved Authority to Print Invoice (ATP), Certificate of Registration (COR) BIR Form 2303, last booklet printed
  • 55. Step 4 – Other Requirements Register your business with the following offices to comply with existing regulations: – Social Security System (SSS) – Department of Labor and Employment (DOLE) – PhilHealth – PAG – IBIG – Department of Environment and Natural Resources (DENR) Q and A “What is the second step in registering business in the Philippines?” Step 2 - Business Permit
  • 56. CHOICE OF BUSINESS NAME What to remember in the choice of business name? ➢ The choice of business name is a matter of personal choice. ➢ The entrepreneur must take care to choose a name that will not be confused with the name of other business. ➢ Some companies have compiled database that contain the names of wide range of entities and products. Entrepreneurs can do the same. ➢ The most effective form of protection is registration. Have the business name, logo, slogan, trademark be registered. ➢ Understand what is intellectual properties, patents, inventorship, copyright and have it registered.
  • 57. MONEY SAVINGS OPTION AT START-UP ✓ BANKING! Always consider banking. That is exactly their pur pose. Build good relationship and partner with a reputable bank of your choice. ✓ Experienced entrepreneurs understands that “Cash is King!” . Cash is needed for current growth and to prepare for future growth. ✓ Improve Cash Flows. Improved cash flows can better avoid the crisis of being cash out. ✓ Credit. Credit on loanable amount needed. This will give you the ability to cope up with your financial obligations. ✓ Avoid reluctant or expensive lenders or investors.
  • 58. ✓ Trade Credit. Trade Credit is essential. Raw materials for your production can be sourced out thru trade credit. Credit is extended to you by your suppliers who let you buy now and pay later. This will lengthen the use of your available cash. ✓ Finance internally by reducing the operating cash cycle or increa- sing margins. To reduce the operating cash cycle entrepreneurs adopt a “collect early, pay late” focus. Examples of these are: - Obtain partial payments from customers - Provide discounts for customers cash or early payments - Maintain good collection policy - Negotiate better payment terms with your suppliers ✓ Determine what a customer will pay for a product – rather than set a price based on covering cost and allowance for profit. ✓ Conserve cash to reduce high inventory levels and cash balances ✓ Keep your inventory moving.
  • 59. THE INSTANT OFFICE ✓ Home Office. There is no better office than your own home. Home office provide you all the flexibility you want. Not to mention how much money you save from renting one. ✓ Consider single desk office space. This is ideal if the location of your business is within the city. Though you might still be paying rent but there is a lot of option to choose from. Remember, the bigger the space the higher the price. Choose an office space that is appropriate to your office needs. ✓ The Virtual Office. A virtual office provides address (and sometimes communication) services for a fee, without providing dedicated office space. It differs from "office business centers" or "executive suites", which do provide physical office space and/or meeting rooms.
  • 60. What is best of having a virtual office? - It is a combination of technical innovation and information age. - It blends in at home and work to gain efficiencies in both - Office expenses are low, while the user’s professionalism retains the image of a traditional, high cost office. - Office users reduces environment impact, as well as the negatives of daily commute. - It can allow low-cost expansion without long term commitments. - eliminate the traditional burden of health care, records, payroll, insurance & rent. Also, traditional time off (sick days, vacations, personal leaves, etc.) does not apply to virtual staff. ✓ Executive Business Centers. Which provides physical office space (it could be a whole building floor) and meeting rooms. An onsite amenities are provided for employees and allows room for socialization among workers. However it is a high cost lease and requires long term commitment. Not ideal office for start-ups.
  • 61. - END - THANK YOU!!