sources of financing debt and equity - quest f.PPTVIP

Sources of Financing: Debt and Equity The variety of commercial funding sources is huge. The trick is knowing them and matching them to the appropriate applicant! Planning for Capital Needs Capital: any form of wealth employed to produce more wealth Fixed capital: to purchase a company’s permanent or fixed assets such as land, buildings, computers, and equipment Working capital: to support a business’s short-term operations Growth capital: to finance a company’s growth or its expansion in a new direction Equity vs Debt Capital Equity capital: represents the personal investment of the owner (s) of a company or outside investors Debt capital: the financing that a small business owner has borrowed and must repay with interest Sources of Equity Capital Personal savings Friends and family members Angels Partners Corporate venture capital Venture capital companies Public stock sale Private Placements Syndications Angels Private investors, wealthy individuals, entrepreneurs themselves, who provide money in exchange for equity stakes Ranging from $10,000 to $2M Every year: 230,000 angels invest $23 B in 50,000 companies Average: Angels invest in 10% of opportunities, ave investments, each, of $80,000 in 3.5 firms Angel networks: 200 Venture Capital Companies $3-10M ave investment Venture Capitalists want to see: Competent management Competitive edge Growth industry Viable exit strategy Intangible factors Public Stock Sale Advantages Ability to raise large amounts of capital Improved corporate image Improved access to future financing Use of stock for acquisitions Listing on a stock exchange Public Stock Sale Disadvantages Dilution of ownership Loss of control Loss of privacy Reporting to SEC Filing expenses Accountability to shareholders Pressure for short-term performance Demands of time and timing Debt Financing Commercial banks Non-banks Federally-sponsored programs State and Local Development Programs Internal methods of financing Commercial Banks Short-t