Chapter 5: Identifying and Analyzing Domestic and Internal Opportunities Flashcards
Financing
Describe the three types of financing
DEBT:
- Interest-bearing
- Fixed Costs: legally can pay interest
- Does not dilute ownership
- Collateral and/or co-signee
EQUITY:
- Does dilute ownership (look for missing knowledge)
- Dilutes financial responsibility
- No Fixed Costs
- Make sure to have an exit route
BOOTSTRAPPING:
- All profits reinvested into the company
- 90% + love & patient money
- Milestoning ( Borrow in increments, invest in T-Bills)
Describe working capital loans
- Loans that serve to pay for “catch-up” period (exposed days)
- Lower interest rate
- Normally pays for employee salaries/etc.
Describe term loans
Used to purchase equipment, etc.
Describe leasing
- Leasing is strictly for OPERATIONS
- Used for a certain period of time
- You have an OPTION to buy
- Can help you with bargaining… you owe them money, use this!! (frugality behavious)
Describe letters of credit
- Letters saying that the “bank” will cover if not paid by the company
- 3% of total cost of order should be included in price
Describe supplier trade credit
BAD TECHNIQUE:
- You pay supplier when the client pays you
- Supplier will simply increase their pricing or drop you
Describe Leverage buy out
- Use assets of company about to buy to get loans
(ex: I will give you 5 trucks if you help me buy out this truck company)
AFTER BUY OUT:
- Eleminate redundancies: payroll, expenses
- Avoid negative contagion: keep y own employees, maintain motivation
Describe Equity and its different categories of investing
1) Venture Capital: Robotics, pharma, IT… heavy upfrom R&D
2) Venture Capital + Risk
3) Angel Investors: Management link, CAN act as missing ressource/knowledge/etc.
4) Corporation Venturing: INTRAPRENEURSHIP –> Ex: Saturn to GM
- A company creates a new venture
