Unit 9 Raising FinanceUnit 9 Raising Finance

•Sources of raising finance

•Language associated with raising finance

Discussion

How 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? List three methods.

I. Ways of raising finance p.76 Raise money

Go to Go to

I. Ways of raising finance (keys) p.76 Raise money

Debt Equity

Go to Go to

Bank for a bank loan

Private investo

rs

Secured

Unsecured

Venture capitalis

ts

Public offering on stock marke

t

Debt vs. Equity: Sources of funds Debt – Exchange of money for promise of repayment (principal + interest) • Commercial Banks and similar debt capital 借入资本 : Funds obtained

through borrowing. Equity – Exchange of money for ownership in 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.

Key terms:

p.77 of Book 4 “Financial terms”

II. Debt capital: Discussionp.76

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?

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).

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?

II. Debt capital: Bank loanspp.78-79 Reading “Financing start-up

businesses”

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”

III. Equity capitalEquity 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.

Planning for financingKey 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.

Skills: Negotiatingp.81

Case study pp.82-83