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Member Workshop: Small Business Financing 101 - Aug 24
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Last Post Aug 24, 2007 2:05 PM by: deirdre@ebay.com
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Member Workshop: Small Business Financing 101 - Aug 24

Jul 27, 2007 12:45 AM
Topic: Member Workshop: Small Business Financing 101

Host: prosper-community
Date: Friday 08/24
Time: 1:00 p.m. to 2:00 p.m. Pacific time
Location: Workshop Board

Description: Need a small business loan and not sure where to get it? Or, are you certain a loan is what you need? In this informative workshop, Prosper Marketing Director, and former eBay PowerSeller Program Manager, Shira Levine will demonstrate how financing can help your business. We’ll cover the five basic questions every business should ask themselves before you finance, how to know where you stand financially, and the importance of cash reserves in your company. Then we’ll cover financing basics: debt vs. equity, credit scores and reports, and common pitfalls to avoid. The workshop will end with how to create an excellent loan listing on Prosper that will get your business funded. We’ll also look at how eBay PowerSellers are using Prosper both to borrow for business and to make money using Prosper’s referral program.

Cheers,

Deirdre
eBay Community Development
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Member Workshop: Small Business Financing 101 - Aug 24

Aug 24, 2007 12:55 PM
Welcome and thanks for joining us today!

We love workshops to be interactive, so please feel free to ask your questions that directly relate to this topic.

Added note: If you click on the "Watch this discussion" link, you will receive an email each time someone posts to the workshop.

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Cheers,

Deirdre
eBay Community Development
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Member Workshop: Small Business Financing 101 - Aug 24

Aug 24, 2007 1:02 PM
Hi everyone,

It is a pleasure to revisit the eBay discussion forums!
I’d like to start by asking a few questions that will help when it comes to financing:

What makes financing so important to small business?
Whatever your business stage, sufficient capital is essential
• Starting a business
• Growing a business

Shira Levine
Prosper Marketing Director
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Member Workshop: Small Business Financing 101 - Aug 24

Aug 24, 2007 1:04 PM
What do you need to know before you finance your business?

Ask yourself five simple questions:

1. What is your current financial picture?

Be aware of “how you look” financially
Building a financial reputation takes work

2. What are your financial goals?

Do you need working capital?
Are you expanding?
Are you making capital investments?

3. What is your timeline?

Like many things, financing works best when it is not done in a hurry

4. What is going on in your industry?

Are you in a growing or declining industry? (this question is extra important for eBay sellers. Sometimes specializing in declining industries such as video games can be a great business to be in!)

5. How does financing fit with your business plan?

A well-constructed business plan provides context for your financial needs
Most financing sources will ask to see your business plan
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Member Workshop: Small Business Financing 101 - Aug 24

Aug 24, 2007 1:06 PM
How do you know where you stand financially?

Step 1: Estimate your costs
• Start-up costs = one-time, large expenses
--Examples: Fees for incorporating, warehouse, digital camera
• Ongoing expenses = Regular payments for goods and services
--Examples: Utilities, inventory, insurance
Tip: The Small Business Administration has useful tools for calculating your start-up and ongoing costs on their Web site www.sba.gov

Step 2: Know your inventory/cash flow cycle
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Member Workshop: Small Business Financing 101 - Aug 24

Aug 24, 2007 1:07 PM
How important is cash to your company?

In All Companies, Cash Is King
Be sure to know:
• When you need money (seasonality)
• Where your best sources are
• How to maintain good relationships with those
sources

Follow this simple cash flow equation:
Cash flow =
Your Income
– Capital expenses
–Inventory purchases
= Your current cash flow
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Member Workshop: Small Business Financing 101 - Aug 24

Aug 24, 2007 1:08 PM
What are common cash flow terms you should know?

Cash forecast = An honest timeline of monthly and projected expenses
– Critical “roadmap” for every business

Cash = Money in the bank
– “Income” is not the same as cash

Profit = Money you expect to make over a given time
-You cannot spend “profit” until it turns into cash
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Member Workshop: Small Business Financing 101 - Aug 24

Aug 24, 2007 1:09 PM
What is the difference between debt & equity?

Debt:
Definition: Borrowing
Examples: Credit cards, banks, Prosper (Link)
Best for: targeted business needs
Pro: You retain control of your company
Con: Must be paid back, can be costly

Equity:
Definition: Money raised in exchange for share of ownership
Examples: Friends & family, VCs, angel investors
Best for: rapidly growing companies
Pro: Way to get money without going into debt
Con: Equity is never “free” money


"Debt is dating and equity is marriage."
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Member Workshop: Small Business Financing 101 - Aug 24

Aug 24, 2007 1:11 PM

How are credit scores important to your business?

Often lenders use your personal credit score as a proxy for your risk as a business borrower. A credit report is a statement of your ability to pay back
a debt based on:
• Bill-paying history
• Number of accounts
• Current outstanding debt
• Length of time you have had a credit profile



How do you learn your credit score?

The Fair Credit Reporting Act (FCRA) allows you to request a free copy of your credit report and score once per year. To order your copy, visit www.annualcreditreport.com.
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Member Workshop: Small Business Financing 101 - Aug 24

Aug 24, 2007 1:12 PM
How do you maintain and build your credit score?

• Use credit responsibly
• Pay your bills on time
• Keep balances low on credit cards—don’t max
them out
• Only open the credit card accounts you need
• Pay off debt rather than closing or moving account balances
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Member Workshop: Small Business Financing 101 - Aug 24

Aug 24, 2007 1:13 PM
How do I avoid common credit pitfalls?

1. Balance is the key:
– Over-leveraging: Build a safety net with at least six months of
cash reserves
– Under-leveraging: A properly leveraged competitor will beat you

2. Personal guarantees: you are your business

3. Watch out for hidden credit card terms

4. Be aware; awareness is 80% of financial success
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Member Workshop: Small Business Financing 101 - Aug 24

Aug 24, 2007 1:14 PM
What is Prosper?

Prosper is a marketplace for credit that enables people to lend money to other people in a safe, efficient manner, like an eBay for loans. Prosper is a leap back to a time when people formed credit communities to help themselves live better lives and earn a fair return on their money. Prosper's founding principle is that people from close communities act more responsibly towards each other. Prosper leverages this powerful concept of group responsibility and applies it to person-to-person lending—resulting in better interest rates for people that borrow and lend.

Borrowers join Prosper to request loans up to $25,000 by posting listings indicating the maximum interest rate they wish to pay. Lenders search for and select these listings based on the borrower's credit, debt profile, and group affiliation. Lenders bid on listings by indicating a minimum rate they are willing to accept. When a loan is matched between borrower and lender, Prosper handles all of the tasks needed for payment and collection of the loan.
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Member Workshop: Small Business Financing 101 - Aug 24

Aug 24, 2007 1:14 PM
Who are the borrowers?

A Prosper borrower is any person who is a U.S. resident with a credit score of at least 520, a bank account, and a social security number. After passing Prosper's anti-fraud and identity checks, borrowers can request unsecured loans from $1,000 to $25,000 at rates they select. Borrowers should join a group to ensure they get access to the best rates. Prosper allows borrowers to post listings on the platform regardless of their credit or income.
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Member Workshop: Small Business Financing 101 - Aug 24

Aug 24, 2007 1:15 PM
What kinds of loans are available on Prosper?

Borrowers can request 3-year, fully amortized loans up to $25,000. Borrowers can repay the full amount of the loan at any time; there are no early payment penalties

Learn how to create a loan listing on Prosper: Link
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Member Workshop: Small Business Financing 101 - Aug 24

Aug 24, 2007 1:16 PM
Are these collateral loans?

No. All loans on Prosper are based on borrowers' credit scores and a group's reputation. Prosper does not offer collateral loans
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