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FINANCING THE VENTURE. Financing the Venture Capital is any form of wealth employed to produce more...

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FINANCING THE VENTURE
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Page 1: FINANCING THE VENTURE. Financing the Venture  Capital is any form of wealth employed to produce more wealth.  Three forms of capital are commonly identified:

FINANCING THE VENTURE

Page 2: FINANCING THE VENTURE. Financing the Venture  Capital is any form of wealth employed to produce more wealth.  Three forms of capital are commonly identified:

Financing the Venture

Capital is any form of wealth employed to produce more wealth.

Three forms of capital are commonly identified: 1. Fixed capital,2. Working capital3. Growth capital

Page 3: FINANCING THE VENTURE. Financing the Venture  Capital is any form of wealth employed to produce more wealth.  Three forms of capital are commonly identified:

Fixed capital

is used to purchase a company’s permanent or fixed assets;

Main types of company’s fixed assets: land building Equipment

Money invested in fixed asset tends to be frozen because it cannot be used for any other purpose

Page 4: FINANCING THE VENTURE. Financing the Venture  Capital is any form of wealth employed to produce more wealth.  Three forms of capital are commonly identified:

Working capital

Represents the business’s temporary funds and is used to support the business’s normal short-term operations;

Current assets minus current liabilities; Used to buy inventory, pay bills,

finance credit sales, pay wages and salaries and take care of unexpected emergencies.

Page 5: FINANCING THE VENTURE. Financing the Venture  Capital is any form of wealth employed to produce more wealth.  Three forms of capital are commonly identified:

Growth capital requirements surface when an existing business is

expanding or changing its primary direction

finances expansion or purchasing new buildings, hiring additional workforce, increasing inventory.

Page 6: FINANCING THE VENTURE. Financing the Venture  Capital is any form of wealth employed to produce more wealth.  Three forms of capital are commonly identified:

Sources of Capital

1. Owner’s Equity 2. Friends and Family3. Angel investors4. Commercial loans5. Trade or supplier credit6. Leasing companies7. Venture capital companies8. Commercial finance companies

Page 7: FINANCING THE VENTURE. Financing the Venture  Capital is any form of wealth employed to produce more wealth.  Three forms of capital are commonly identified:

Owner’s Equity

At the first stage of financing, entrepreneurs usually invest their own funds. Coming from the owner’s personal savings.

Page 8: FINANCING THE VENTURE. Financing the Venture  Capital is any form of wealth employed to produce more wealth.  Three forms of capital are commonly identified:

Friends and Family

Raising financial capital from friends and family is a common approach for entrepreneurs launching a new venture. Friends and family are more likely to invest in a venture because of the personal relationship established with them over time.

Page 9: FINANCING THE VENTURE. Financing the Venture  Capital is any form of wealth employed to produce more wealth.  Three forms of capital are commonly identified:

Angel investors

includes any individual who invests his or her own money in a new venture, typically in return for equity in the venture. Angels range from professionals, such as doctors and lawyers, to successful entrepreneurs who are now seeking to finance one or more new ventures. Angels are private investors who not only invest their money in small companies, but they also offer valuable advice and counsel to them.

Page 10: FINANCING THE VENTURE. Financing the Venture  Capital is any form of wealth employed to produce more wealth.  Three forms of capital are commonly identified:

Commercial loans

4.1. Short-term commercial loans (30 to 90 days) are the most common loans made to a small business. They usually cover business operation expenses such as rent, insurance, advertising, inventory or salaries. Short-term loans are often unsecured and repayment is usually a lump sum, including interest when the loan matures.

Page 11: FINANCING THE VENTURE. Financing the Venture  Capital is any form of wealth employed to produce more wealth.  Three forms of capital are commonly identified:

Commercial loans

4.2. Long-term commercial loan is for five years or more to purchase an existing business, buy real estate, or construct or improve a building or facility. The long-term loan is always secured by the assets for which the loan was made, usually requires constant monthly payments and often has a variable interest rate.

Page 12: FINANCING THE VENTURE. Financing the Venture  Capital is any form of wealth employed to produce more wealth.  Three forms of capital are commonly identified:

Trade or supplier credit

Payment terms offered by suppliers are a potential source of credit. Study the discounts for early payment and the penalty for late payment to determine the true cost of the credit. While some suppliers will extend credit only to well-established, proven firms, many will extend limited credit to new businesses to encourage another outlet for their merchandise.

Page 13: FINANCING THE VENTURE. Financing the Venture  Capital is any form of wealth employed to produce more wealth.  Three forms of capital are commonly identified:

Leasing companies

Leasing business equipment is another way to reduce capital needs. Everything from office furniture to food processing equipment can be obtained from leasing companies or commercial finance companies. Leasing is generally more expensive than bank financing and is limited to items that have a long serviceable life, widespread use, and are easily repossessed in the event of default.

Page 14: FINANCING THE VENTURE. Financing the Venture  Capital is any form of wealth employed to produce more wealth.  Three forms of capital are commonly identified:

Venture capital companies

Are for-profit, professional investors looking for fast-growing companies in “hot” industries. When screening prospects, venture capital firms look for competent management, a competitive edge, a growth industry, and important intangibles that will make a business successful.

Page 15: FINANCING THE VENTURE. Financing the Venture  Capital is any form of wealth employed to produce more wealth.  Three forms of capital are commonly identified:

Commercial finance companies Offer many of the same types of loans

that banks do, but they are more risk oriented in their lending practices. They emphasize accounts receivable financing and inventory loans.

Page 16: FINANCING THE VENTURE. Financing the Venture  Capital is any form of wealth employed to produce more wealth.  Three forms of capital are commonly identified:

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