Forums: Discussions for entrepreneurs and small business.

I am starting to research funding options for my start up. I was wondeirng how you present the purpose of the financing to the funding source. I also was wondering if and why "Paying employees" would be a vialble reason to seek funding.

I ask because I`m not sure if investors want you to cover something like that.


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Follow the journey of Marvin Hawkins Visual Concepts and Nothing Like It Games at http://gamerdeveloper.blogspot.com/

When you say, "Paying employees." Are you referring to paying customers?

I`d want a breakdown of sources of funds (D&E,) and uses of funds (Equip, inventory, direct labor, SG&A, work cap...).  At least 1 year detailed cash flow analysis.  All assumptions, sales drivers and risks.

Yes, paying direct labor should be included if neceassary to reach BP goals. 

 

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Travis Tschepen
Hibachi Bros. LLC

--My goal in life is to be as good of a person my dog already thinks I am.--

raise capital I`m reffering to having a fund for payroll. I wasn`t sure if that was something that investors would fund.

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Follow the journey of Marvin Hawkins Visual Concepts and Nothing Like It Games at http://gamerdeveloper.blogspot.com/

Well I know some owners that purposely inflated some gray areas for cost which allowed them to get some "extra" cash for later on, like paying employees. It`s NOT the most ethical way to capture cash from a bank or investor, but it can be done. Our good friend is a heat & cooling guy and suggested that he could "over charge" us and then give us the money, there is a risk he could just walk away with it. We ultimately decided not go that route because we wanted an honest relationship with the bank because at some point we`re going to get another loan for a second business and we both didn`t want the bad Karma following us around.

In general, funding sources (whether debt or equity) anticipate that some amount will be used for operating expenses, which would include payroll.

Most investors expect the founder(s) to receive enough "salary" to live on, but usually resist paying "top" dollar.

The payroll expense should be covered in your business plan - both the narrative and numerical portions.

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Business Growth Masters, LLC -
Capital Catalysts for Entrepreneurs
Home of the Scalable Business Plan and QuikStart Capital Programs
http://www.bizgrowthmasters.com
info@bizgrowthmasters.com

I think this all depends on the type of funding you are able to obtain and how detailed your business plan is. If you are able to get an SBA loan, that could undoubtedly cover employee payroll...at least temporarily. If you believe your business will take off with profits very fast and just need a little push to get started, this might be a good option.

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