1. Raising Capital and Cash Flows
“Attract Investors,
Inspire Trust,
Encourage Commitment”

2. Investor Due Diligence
Investors need to be sure that the businesses they invest in will make them money
In order to be sure, they ask the following questions
How will the venture earn revenue?
What is the potential profit?
How long until profitable?
How much money needed?
Secured? How?
Convertible to cash? When?
Management of venture?
Any investor involvement in management?

3. Equity Financing Ownership in exchange for financial contribution
In other words, when you invest money into the business, you are becoming a part owner of the business
From a variety of sources –
Savings
Family
Friends
Business Partners

4. Equity Financing How can you divest your ownership? Venture Capital:
Partnership
Incorporate & sell shares
Venture Capital
Business employees (stock purchase/options)
Venture Capital:
Money invested into startup/growing businesses

5. Equity Financing Advantages +’s Disadvantages -’s
Greater equity increases borrowing power
Entrepreneur may become employee of other investors
Generous supplier credit terms if lots of equity
Entrepreneur may lose independence
Less individual risk
More involved and contributing owners
Investors share profit based on investment
Investors interested in venture success
Additional legal and audit fees

6. Debt Financing Money borrowed to finance a venture.
Money can be borrowed from numerous places and in numerous ways
Cost (interest) is tax deductible.
Debt to Equity Ratio of 1:1 to 4:1
4:1 higher risk
Higher risk may require security (collateral)

7. Six C’s of Credit Banks look at: Character Capital Collateral Capacity
Honest, trustworthy, reliable
Capital
How much does the Entrepreneur have invested?
Collateral
Security / assets pledged
Capacity
Of entrepreneur/business to manage
Circumstances
Product, Competition, Economy, Inflation
Coverage
Insurance protection

8. Sources of Financing Banks
Chartered Banks are financial institutions organized under Federal Legislation
Line of Credit
Floating & Interest only
Term Loan
Equipment – Time frame
Mortgage
Long term – real estate
Each form can have various repayment options

9. Sources of Financing Credit Unions
Provincially organized financial institutions
Usually associated with labour organizations
Many “Caisse Populaires” in Quebec and Eastern Ontario
Must be a member to obtain financing
Members may receive interest rebates if C.U. has an annual surplus

10. Sources of Financing Government Agencies
Federal and provincial
Grants, guarantees or loans
Grant not repayable
Summer jobs program
tcan/1medt/smallbiz/en/sb_ye_su mmerco_en.jsp

11. Application to Venture Plan
Now that you have looked at the various sources of capital financing, you need to outline where you will be getting your financing
Fill out the given outline and then incorporate that information into your financial analysis plan