For repayment special terms a brief description of

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for repayment, special terms), a brief description of the uses that will be made of the capital received, and a summary of how the investor is expected to achieve the targeted rate of return. It is important to realize the terms for financing your company that you propose here are only the first step in the negotiation process with those interested in investing, and it is very possible that your financing will involve different kinds of securities than originally proposed. A. Desired Financing: Review the monthly cash flow projections and your estimate of how much money is required over the next three years to carry out the launch and/or expansion of your business as described. Determine the amount and timing of cash infusions required to prevent cash balances from going negative. Add a cash safety cushion (~25% as a good “guesstimate”) to the anticipated cash needs to protect against unexpected expenses or delayed income. Determine the type of funding that will suit your business: debt, equity or non-traditional financing. Indicate how this capital requirement will be obtained -- from whom and how much will be obtained via loans, lines of credit, equity investments, etc. B. Offering (this is the deal structure your pitch for money): If you have decided to seek equity capital, then you need to describe the type of security being offered (e.g., common stock, convertible debentures, debt with warrants, debt plus stock), the unit price, and the total amount of securities to be sold in this offering. If securities are not just common stock, indicate by type, interest, maturity, and conversion conditions. Show the percentage of the company that the investor in this offering will hold after it is completed or after exercise of any stock conversion or purchase rights in the case of convertible debentures or warrants i.e. what share of your company does the investor get for a specified investment. Securities sold through a private placement (and therefore exempt from SEC registration) should include the following statement in this section : “The shares being sold pursuant to this offering are restricted securities and may not be resold readily. The prospective investor should recognize that such securities might be restricted as to resale for indefinite period of time. Each purchaser will be required to execute a Non- Distribution Agreement satisfactory in form to corporate counsel”. If you are seeking a loan, then you need to indicate to the potential lender how the loan will be repaid and what the interest rate is. What is the collateral for the loan? C. Capitalization: Present in tabular form the current and proposed (post-offering) number of outstanding shares of common stock. Indicate any shares offered by key management people and show the number of shares that they will hold after completion of the proposed financing.
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  • Spring '17
  • Yongseok Jang
  • Marketing, The Market

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