Sources of raising finance Language associated with raising finance
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1 Sources of raising finance Language associated with raising finance Unit 9 Raising FinanceSources of raising financeLanguage associated with raising finance
2 DiscussionHow can an individual raise capital to set up or expand a business?List three methods.How can a business raise capital to start up or expand?
3 I. Ways of raising finance p.76Raise moneyGo toGo to
4 I. Ways of raising finance (keys) p.76Raise moneyDebtEquityGo toGo toBank for a bank loanPrivate investorsVenture capitalistsPublic offering on stock marketSecuredUnsecured
5 Debt vs. Equity: Sources of funds Debt – Exchange of money for promise ofrepayment (principal + interest)• Commercial Banks and similar debt capital 借入资本: Funds obtained through borrowing.Equity – Exchange of money for ownershipin company• Venture Capitalists and Angel Investors equity capital 产权资本，股本资本: Funds obtained through owner investments, venture capital, stock issues, company earnings, or sales of assets.Business angels: Private investors invest in new start-ups.
7 II. Debt capital: Discussion What are the pros and cons for a private individual of borrowing money from the following:a bank?a friend or colleague?a member of your family?a loan shark?a credit card company?
8 II. Debt capital: Bank loans Commercial banks:• Typically not a source for start-up.• Loans are typical made on 5 C’s (character, capital, collateral, capacity, condition).
9 II. Debt capital: Bank loans p.76 of Book 3“Making loans”What are the three important factors to consider when deciding whether to make a loan?
10 II. Debt capital: Bank loans pp Reading“Financing start-up businesses”
11 II. Debt capital: for reference Business Plan: Writer: Reality check; a written guide to run a business Reader: Whether to invest in it Contents: refer to “Business Plan Outline”
12 III. Equity capital Equity capital • No due date • Does not have to be repaid in the same manner as borrowed funds as it can become a permanent part of capital of the business.• New businesses have higher risk and, hence, owners generally are required to have larger shares of owner equity relative to proven businesses.
13 Planning for financing Key points to consider:• Ensure that the kind of finance that you are seeking is appropriate;• Ensure that you know how much is needed and for how long, and what you are going to do with the money;• Prepare your case fully before meeting with the Bank / Investor.