Comm320_Section4-Finanacing

Comm320_Section4-Finanacing - FINANCING CoursePack...

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FINANCING Course Pack–Section 4: Financing
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nancing verview Financing Overview Raising $$$$$$$$ (obtaining financing) has always been a major challenge in the venture creation process; The Business Plan is the key document; and take note…It Can Be one! with Perseverance Perseverance and Done!. .. with…Perseverance, Perseverance, and more…Perseverance! veral concepts to be familiar with: Several concepts to be familiar with: Angel Investor, Capital, ebt / Equity considerations Debt / Equity considerations Retained Earnings, Venture Capital. 3
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apital and Planning Capital and Planning Yes, it’s true, CASH is King! or Queen! Issues: How much do you need during start up and to cover the “burn cash” phase? How much are you putting in? Any other partners?? Their equity? What is the balance to finance? Use of debt or equity (control vs. cash conservation)? What is the timing of this process? This is generally linked to cash flow challenges / milestones. 4
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nancing urces, Business ages Financing sources, Business stages During the start up stage it is primarily personal savings, personal credit cards and the personal loans of the entrepreneur (s) that account for the start up financing; External lenders are reluctant to take risk with a start p; up; At the growth stage, once the concept has been proven and the business is generating positive cash flow , the primary sources of expansion financing are commercial loans, commercial lines of credit and 5 trade credit from suppliers.
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urces / Stages Sources / Stages When the business has low growth potential then the following are the rimary methods of financing: primary methods of financing: Early stage (seed capital): Used for feasibility study and business plan, the sources are from ersonal savings and family/friends government grants personal savings and family/friends, government grants ; Early stage (start up): Used to get the business running, again, the sources are personal vings personal loans and credit cards and family/friends savings, personal loans and credit cards and family/friends, perhaps some trade credit, government programs . Expansion / Maintaining Operations: First stage: Personal savings, retained earnings, trade credit, business loans ; Second stage: Retained earnings, commercial lines of credit, trade edit 6 credit .
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urces / Stages Sources / Stages A start up business with high growth potential is more likely to use equity financing because an investor sees the medium long term potential of more return; Early stage Financing: Seed capital: asibility and business plan are often financed by ngel investors The Feasibility and business plan are often financed by angel investors . The business is not “above the radar” yet, is not seen by VC; Start up: Usually angel investors again because this phase can be within their capacity.
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Comm320_Section4-Finanacing - FINANCING CoursePack...

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