Originally you thought that $5,000 would be enough to start-up your business. You have now realised after completing the worksheets that this is not enough - you will need to raise some more cash.

You contacted a private lender, Malcolm Mills, who advertised on the internet. He offers business finance. His terms are:

• Up to $100,000 over 3 years
• Interest rate 8.0%
• Set up fees $2,000 (included in the loan total)
• Must be secured with a mortgage (which can be a second mortgage if there is already a first mortgage in place).

You have a home that is worth about $800,000 and a home loan owing of about $100,000. QUESTION: 1) Calculate how much you would like to borrow from the lender to cover: start-up costs, working capital (for cash flow shortfalls) and unexpected 'contingency'. Please refer to the figures I have provided, and allow at least $2,000 to $$5,000 to cover the unexpected. Deduct the cash you have available.

Calculate how much capital needed:	$
Start up costs	+
Working capital (for cashflow shortfalls)	+
Unexpected 'contingency' (suggest $2000 to $5000)	-
Available cash	$5,000
Capital Required	=

2) Please refer to the figures provided, and record the month that starts to show consistent positive net cashflows each month.

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Jx Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Total yr Cash inflows Coffee regular $ 16,528 $ 15,968 $ 15,393 $ 17,024 $ 15,695 $ 16,600 $ Start up costs 17,520 $ 15,378 $ 16,298 $ 15,927 $ 16,205 $ 16,751 $ 195,287 Coffee Large $ 12,158 $ 11,746 $ 11,323 $ 12,523 $ 11,544 $ 12,211 $ 12,888 $ 11,312 $ 11,989 $ 12,676 $ 12,792 $ 12,322 $145,484 Description Cost Bottled water $ 961 $ 928 $ 895 $ 990 $ 914 $ 966 $ 1,019 | $ 895 $ 947 $ 1,003 $ 1,349 $ Banana cake $ 2,521 $ 2,433 $ 2,346 $ 2,594 $ 2,397 $ 2,536 $ 2,675 $ 2,346 $ 2,485 $ 2,631 $ 3,537 $ Carrot cake $ 2,369 $ 2,287 $ 2,205 $ 2,438 $ 2,253 $ 2,383 $ 2,514 $ 2,205 $ 2,335 $ 2,472 $ Choc chip cookie $ 2,369 $ 2,287 $ 2,205 $ 2,438 $ 2,253 $ 2,383 $ 2,514 $ 2,205 $ 2,335 $ 2,472 $ 3,324 $ 3,324 $ 975 $ 11,842 2,558 $ 31,058 2,404 $ 29,188 2,404 $ 29,188 Professional advisors Legal and accounting Training course $750 $600 Website development $1,000 Total cash inflows 36,908 $ 35,649 $ 34,365 $ 38,008 $ 35,054 $ 37,079 $ 39,128 $ 34,340 $ 36,389 $ 37,182 $ 40,531 $ 37,413 $442,047 Licences and Registrations Licences and permits Cash outflows Business name registration Start up costs (less $5,000 in savings) $ 29,544 $ $ $ $ $ $ $ $ $ $ $ $ 29,544 Company registration Other $200 $150 $600 Coffee (variable costs) -Raw materials and labour $ 16,925 $ 16,351 $ 15,762 $ 17,433 $ 16,071 $ 16,999 $ 17,941 $ 15,748 $ 16,690 $ 16,891 $ 17,122 $ 17,153 $201,086 Purchase price of retail pre pkgd products Non-current Assets Coffee machine $8,500 - Bottled water $ 273 $ 263 $ 254 $ 281 $ 259 $ 274 $ 289 $ 254 $ 269 $ - Banana cake $ 1,691 $ 1,632 $ 1,573 $ 1,740 $ 1,607 $ 1,700 $ 1,793 $ 1,573 $ 1,666 $ 284 $ 1,764 $ 382 $ 2,372 $ 277 $ 3,357 1,715 $20,825 Coffee cart or cabinet or bench $2,520 Refrigerator $999 - Carrot cake $ 1,553 $ 1,499 $ 1,445 $ 1,598 $ 1,476 $ 1,562 $ 1,647 $ 1,445 $ 1,530 $ 1,620 $ 2,178 $ 1,575 $ 19,125 Glass food display $5,600 - Choc chip cookie $ 1,553 $ 1,499 $ 1,445 $ 1,598 $ 1,476 $ 1,562 $ 1,647 $ 1,445 $ 1,530 $ 1,620 $ 2,178 $ 1,575 $ 19,125 Point of sale machine with card reader and cash drawer $1,865 Fixed costs - Rent $ 3,100 $ 3,100 $ 3,100 $ 3,100 $ 3,100 $ 3,100 $ 3,100 $ 3,100 $ 3,100 $ 3,100 $ 3,100 $ 3,100 $ 37,200 Business premises -Electricity $ 200 $ 200 $ 200 $ 200 $ 200 $ 200 $ 200 $ 200 $ 200 $ 200 $ 200 $ 200 $ 2,400 One month rent - Coffee machine servicing $ 21 $ 21 $ 21 $ 21 $ 21 $ 200 $ 21 $ 21 $ 21 $ 21 $ 21 $ 21 $ Internet and WiFi setup 250 - Internet service $ 80 $ 80 $ 80 $ 80 $ 80 $ 80 $ 80 $ 80 $ 80 $ 80 $ Blectricity, gas and water connections. 80 $ 80 $ 960 Insurances - Bank fees $ 10 $ 10 $ 10 $ 10 $ 10 $ 10 $ 10 $ 10 $ 10 $ 10 $ 10 $ 10 $ 120 Signage $3,100 $180 $250 $1,500 $350 - Marketing $ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 600 - Barista (full time) $ 6,360 $ 6,360 $ 6,360 $ 6,360 $ 6,360 $ 6,360 $ 6,360 $ 6,360 $ 6,360 $ 6,360 $ 6,360 $ 6,360 $ 76,322 Operations Stationery-business cards, brochures $280 Total cash outflows $ 61,358 $ 31,064 $ 30,299 $ 32,469 $ 30,710 $ 32,096 $ 33,138 $ 30,284 $ 31,505 $ 32,001 $ 34,053 $ 32,116 $ 410,915 Stock purchase (initial) $400 Net cash flows Advertising -$24,451 $4,585 $4,066 $5,538 $4,344 $4,983 $5,990 $4,056 $4,884 $5,181 $6,478 $5,298 $30,953 Advertising initial campaign $700 Beginning cash balance $5,000 Ending cash balance -$19,451 -$19,451 -$14,866 -$14,866 -$10,799 -$10,799 -$5,261 -$5,261 -$917 $4,066 $10,057 $14,112 $18,997 $24,178 $30,656 -$917 $4,066 $10,057 $14,112 $18,997 $24,178 $30,656 $35,953 Total start up costs $29,544 Jx Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Total yr Cash inflows Coffee regular $ 16,528 $ 15,968 $ 15,393 $ 17,024 $ 15,695 $ 16,600 $ Start up costs 17,520 $ 15,378 $ 16,298 $ 15,927 $ 16,205 $ 16,751 $ 195,287 Coffee Large $ 12,158 $ 11,746 $ 11,323 $ 12,523 $ 11,544 $ 12,211 $ 12,888 $ 11,312 $ 11,989 $ 12,676 $ 12,792 $ 12,322 $145,484 Description Cost Bottled water $ 961 $ 928 $ 895 $ 990 $ 914 $ 966 $ 1,019 | $ 895 $ 947 $ 1,003 $ 1,349 $ Banana cake $ 2,521 $ 2,433 $ 2,346 $ 2,594 $ 2,397 $ 2,536 $ 2,675 $ 2,346 $ 2,485 $ 2,631 $ 3,537 $ Carrot cake $ 2,369 $ 2,287 $ 2,205 $ 2,438 $ 2,253 $ 2,383 $ 2,514 $ 2,205 $ 2,335 $ 2,472 $ Choc chip cookie $ 2,369 $ 2,287 $ 2,205 $ 2,438 $ 2,253 $ 2,383 $ 2,514 $ 2,205 $ 2,335 $ 2,472 $ 3,324 $ 3,324 $ 975 $ 11,842 2,558 $ 31,058 2,404 $ 29,188 2,404 $ 29,188 Professional advisors Legal and accounting Training course $750 $600 Website development $1,000 Total cash inflows 36,908 $ 35,649 $ 34,365 $ 38,008 $ 35,054 $ 37,079 $ 39,128 $ 34,340 $ 36,389 $ 37,182 $ 40,531 $ 37,413 $442,047 Licences and Registrations Licences and permits Cash outflows Business name registration Start up costs (less $5,000 in savings) $ 29,544 $ $ $ $ $ $ $ $ $ $ $ $ 29,544 Company registration Other $200 $150 $600 Coffee (variable costs) -Raw materials and labour $ 16,925 $ 16,351 $ 15,762 $ 17,433 $ 16,071 $ 16,999 $ 17,941 $ 15,748 $ 16,690 $ 16,891 $ 17,122 $ 17,153 $201,086 Purchase price of retail pre pkgd products Non-current Assets Coffee machine $8,500 - Bottled water $ 273 $ 263 $ 254 $ 281 $ 259 $ 274 $ 289 $ 254 $ 269 $ - Banana cake $ 1,691 $ 1,632 $ 1,573 $ 1,740 $ 1,607 $ 1,700 $ 1,793 $ 1,573 $ 1,666 $ 284 $ 1,764 $ 382 $ 2,372 $ 277 $ 3,357 1,715 $20,825 Coffee cart or cabinet or bench $2,520 Refrigerator $999 - Carrot cake $ 1,553 $ 1,499 $ 1,445 $ 1,598 $ 1,476 $ 1,562 $ 1,647 $ 1,445 $ 1,530 $ 1,620 $ 2,178 $ 1,575 $ 19,125 Glass food display $5,600 - Choc chip cookie $ 1,553 $ 1,499 $ 1,445 $ 1,598 $ 1,476 $ 1,562 $ 1,647 $ 1,445 $ 1,530 $ 1,620 $ 2,178 $ 1,575 $ 19,125 Point of sale machine with card reader and cash drawer $1,865 Fixed costs - Rent $ 3,100 $ 3,100 $ 3,100 $ 3,100 $ 3,100 $ 3,100 $ 3,100 $ 3,100 $ 3,100 $ 3,100 $ 3,100 $ 3,100 $ 37,200 Business premises -Electricity $ 200 $ 200 $ 200 $ 200 $ 200 $ 200 $ 200 $ 200 $ 200 $ 200 $ 200 $ 200 $ 2,400 One month rent - Coffee machine servicing $ 21 $ 21 $ 21 $ 21 $ 21 $ 200 $ 21 $ 21 $ 21 $ 21 $ 21 $ 21 $ Internet and WiFi setup 250 - Internet service $ 80 $ 80 $ 80 $ 80 $ 80 $ 80 $ 80 $ 80 $ 80 $ 80 $ Blectricity, gas and water connections. 80 $ 80 $ 960 Insurances - Bank fees $ 10 $ 10 $ 10 $ 10 $ 10 $ 10 $ 10 $ 10 $ 10 $ 10 $ 10 $ 10 $ 120 Signage $3,100 $180 $250 $1,500 $350 - Marketing $ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 600 - Barista (full time) $ 6,360 $ 6,360 $ 6,360 $ 6,360 $ 6,360 $ 6,360 $ 6,360 $ 6,360 $ 6,360 $ 6,360 $ 6,360 $ 6,360 $ 76,322 Operations Stationery-business cards, brochures $280 Total cash outflows $ 61,358 $ 31,064 $ 30,299 $ 32,469 $ 30,710 $ 32,096 $ 33,138 $ 30,284 $ 31,505 $ 32,001 $ 34,053 $ 32,116 $ 410,915 Stock purchase (initial) $400 Net cash flows Advertising -$24,451 $4,585 $4,066 $5,538 $4,344 $4,983 $5,990 $4,056 $4,884 $5,181 $6,478 $5,298 $30,953 Advertising initial campaign $700 Beginning cash balance $5,000 Ending cash balance -$19,451 -$19,451 -$14,866 -$14,866 -$10,799 -$10,799 -$5,261 -$5,261 -$917 $4,066 $10,057 $14,112 $18,997 $24,178 $30,656 -$917 $4,066 $10,057 $14,112 $18,997 $24,178 $30,656 $35,953 Total start up costs $29,544