Business Financing for Beginners (ePub)

Business Financing for Beginners starts by examining the different legal structures for your business and how they can affect your ability to obtain financing. Debt and equity financing are compared together with the different forms of equity ownership.You will then be taken on a tour of financing during different stages of business growth.Many businesses start by borrowing money from friends and relatives. This is covered in a brief chapter on "Love Money".Informal investors or "Angels" are the subject of an extensive chapter which defines their characteristics, their typical profile and hints on where to locate them. It covers what they like to invest in; the size of a typical investment and what the money is used for. It examines corporate angels and the relatively new phenomenon of clusters of angels.Another chapter is devoted to a detailed description of venture capital and who the players are. It takes a look at how much money is being invested and what industry groups are the most favoured for investment; the size of the target companies and the form which the investment takes. It covers five different ways to approach venture capitalists; how to negotiate with them and the criteria used in evaluating deals. The "Due Diligence" process is covered as well as restrictions in the form of covenants. It covers the term sheet, share purchase and other agreements and the final legal agreement. It takes a look at directorships and director's liability.The chapter on bank financing covers different types of loans. It suggests a number of preliminary steps that should be taken before you apply for a loan It takes a view from the banker's side of the desk and how a credit review is conducted together with the banker's favourite financial ratios and collateral requirements.Different types of leasing arrangements are explained together with the advantages and disadvantages of leasing. The decision to lease or purchase is covered together with sale-leasebacks. Finally, suggestions are made on how to locate leasing companies.Factoring is covered as a method of borrowing using accounts receivable. Different methods of payment and financing are discussed together with the advantages and disadvantages. Locating factoring companies is also covered.Different types of Employees Ownership Plans (ESOPs) are covered together with their advantages and disadvantages. The improved performance of companies with ESOPs is discussed together with sources of obtaining further information.An extensive chapter is devoted to selling shares to the public through an Initial Public offering (IPO). It examines how large a company has to be in order to go public and what's involved in the sale of shares. It covers the role of the underwriter, the "Due Diligence" process; valuation, the preparation of a prospectus and the share distribution process. Timing of the issue is critical. The cost of "Going Public" is discussed together with the management time that must be devoted to the effort.A brief chapter covers sources of government assistance in Canada and the US.Use cash flow projections to determine how much money you really need or whether you can self-finance from your sales revenue. Take into account the costs and time involved in raising financing and consider having a contingency plan.The final chapter suggests that you start by preparing your business plan.