Académique Documents
Professionnel Documents
Culture Documents
1
Copyright 2008 Prentice Hall Publishing Company
Raising Capital
Raising capital to launch or expand a business is a challenge. Many entrepreneurs are caught in the credit crunch. Financing needs in the $100,000 to $3 million may be the toughest to fill.
2
Copyright 2008 Prentice Hall Publishing Company
3
Copyright 2008 Prentice Hall Publishing Company
Layered Financing
Entrepreneurs must cast a wide net to capture the financing they need to launch their businesses. Layering piecing together capital from multiple sources.
5
Copyright 2008 Prentice Hall Publishing Company
Equity Capital
Represents the personal investment of the owner(s) in the business. Is called risk capital because investors assume the risk of losing their money if the business fails. Does not have to be repaid with interest like a loan does. Means that an entrepreneur must give up some ownership in the company to outside investors.
7
Copyright 2008 Prentice Hall Publishing Company
Debt Capital
Must be repaid with interest. Is carried as a liability on the companys balance sheet. Can be just as difficult to secure as equity financing, even though sources of debt financing are more numerous. Can be expensive, especially for small companies, because of the risk/return tradeoff.
8
Copyright 2008 Prentice Hall Publishing Company
9
Copyright 2008 Prentice Hall Publishing Company
Personal Savings
The first place an entrepreneur should look for money. The most common source of equity capital for starting a business. Outside investors and lenders expect entrepreneurs to put some of their own capital into the business before investing theirs.
10
Copyright 2008 Prentice Hall Publishing Company
Angels
Private investors who invest in emerging entrepreneurial companies. Fastest growing segment of the small business capital market. .
13
Copyright 2008 Prentice Hall Publishing Company
Angels
An estimated 230,000 angels across the U.S. invest $23 billion a year in 50,000 small companies. Their investments exceed those of venture capital firms, providing more capital to 17 times as many small companies.
14
Copyright 2008 Prentice Hall Publishing Company
Angels
The typical angel:
Invests in companies at the seed or startup stages. Accepts 10 percent of the proposals presented to him. Makes an average of two investments every three years. Has invested an average of $80,000 in 3.5 businesses. 90 percent are satisfied with their investments.
15
Copyright 2008 Prentice Hall Publishing Company
16
Copyright 2008 Prentice Hall Publishing Company
19
Copyright 2008 Prentice Hall Publishing Company
20
Copyright 2008 Prentice Hall Publishing Company
Going Public
Initial public offering (IPO) - when a company raises capital by selling shares of its stock to the public for the first time.
21
Copyright 2008 Prentice Hall Publishing Company
22
Copyright 2008 Prentice Hall Publishing Company
23
Copyright 2008 Prentice Hall Publishing Company
24
Copyright 2008 Prentice Hall Publishing Company
25
Copyright 2008 Prentice Hall Publishing Company
Commercial Banks
...the heart of the financial market for small businesses!
Short-term loans
Commercial loans Lines of credit
26
Copyright 2008 Prentice Hall Publishing Company
27
Copyright 2008 Prentice Hall Publishing Company
3.
4.
You havent told me why you need the money. Cure: Your business plan should explain how much money you need and how you plan to use it. Your numbers dont support your loan request. Cure: Include a cash flow forecast in your business plan.
28
Copyright 2008 Prentice Hall Publishing Company
5.
6.
You dont have enough collateral. Cure: Be prepared to pledge your companys assets and perhaps your personal assets as collateral for the loan. Your business does not support the loan on its own. Cure: Be prepared to provide a personal guarantee on the loan.
29
Copyright 2008 Prentice Hall Publishing Company
30
Copyright 2008 Prentice Hall Publishing Company
Asset-Based Borrowing
Businesses can borrow money by pledging as collateral otherwise idle assets accounts receivable, inventory, and others Advance rate the percentage of an assets value that a lender will lend.
31
Copyright 2008 Prentice Hall Publishing Company
$$
32
Copyright 2008 Prentice Hall Publishing Company
Stock brokerage houses Insurance companies Credit unions Bonds Private placements Small Business Investment Companies (SBICs) Small Business Lending Companies (SBLCs)
33
Copyright 2008 Prentice Hall Publishing Company
34
Copyright 2008 Prentice Hall Publishing Company