Financing Flashcards
(19 cards)
Why do you need funding? (6)
Start up capital:
To purchase or lease assets
Marketing
Inventory
Hire staff
Operational costs
To cover funding costs
What are 3 advantages of Own Capital
Retain full control of business
No application process
Prudent use of funding
What are 3 disadvantages of Own Capital
Risk of losing investment
One of the most expensive costs of funding on a risk adjusted basis
Reduced diversification
What are 3 advantages of Personal Loan
Easier to qualify for than a business loan
Process and cash is available quickly
Unsecured funding - Retain control of business
What are 3 disadvantages of Personal loan
Personal Liability
Limits future access to personal funding
Funding costs more expensive business loans
What are 3 advantages of Venture Capital / Private Equity
Expertise
Connections and nonfinancial resources
Mentoring
What are 3 disadvantages of Venture Capital / Private Equity
Sell a portion of your company
Less control and possible restrictions
Due diligence process takes a long time
What are 3 advantages of Listed Equity / Shares
Access to a large pool of investors
Publicity could lead to future access to funding and resources
Can be used as an incentive to attract skills
What are 3 disadvantages of Listed Equity / Shares
Can lose complete control of your company
Expensive funding cost
Upfront setup costs and time
What are 3 advantages of Preference Shares
Retain full control of your business
Reduces maturity risk
Less expensive than equity investments
What are 3 disadvantages of Preference Shares
Upfront setup costs
Setup time takes longer than a loan
Ongoing program maintenance
What are 3 advantages of Bank Loans
Access
Retain full equity in your business
Low interest rates and access to large amounts of funding
What are 3 disadvantages of Bank Loans
Strict eligibility criteria
Potentially a lengthy application process
Secured loans carry the risk of losing your business
What are 2 advantages of development finance loans
Retain full control of your business
Favourable interest rates
What are 3 disadvantages of development finance loans
Time to receive funding can be significant
Ongoing reporting requirements can be arduous
Limited scope of what kinds of operations will qualify
What are 3 advantages of Listed Debt
Retain full control of your business
Access to a large pool of investors
The least expensive form of debt funding
What are 3 disadvantages of Listed Debt
Upfront setup costs
Setup time takes longer than a loan
Maintenance of program
What are the 4 considerations of Owners
Ownership of business
Control of business
Cost of funding
Timing and process involved in attaining funding
What are the 4 C’s of funder considerations
Capacity - Ability to make debt payments on time
Collateral - Quality and value of assets supporting indebtedness
Covenants - Terms and conditions
Character - Quality of management
