types investurs.pdf

16 TYPES AND SOURCES OF FINANCING FOR START-UP BUSINESS Chapter 1–Lesson 2  1 PERSONAL SOURCE Money is your own savings or equity: Personal resources can include profit-sharing or early retirement funds, real estate equity loans, or cash value insurance polic...

16 TYPES AND SOURCES OF FINANCING FOR START-UP BUSINESS Chapter 1–Lesson 2  1 PERSONAL SOURCE Money is your own savings or equity: Personal resources can include profit-sharing or early retirement funds, real estate equity loans, or cash value insurance policies  2 FRIENDS & RELATIVES Financing sources from parents, relatives and friends, which the friend or relative receives an ownership interest in the business  3 VENTURE CAPITAL They provide capital to young businesses in exchange for an ownership share of the business  4 ANGEL INVESTORS Angel Investors are individuals and businesses that are interested in helping small businesses survive and grow.  5 GOVERNMENT GRANTS/PROGRAMS Central and state government often have financial assistance in the form of grants and/or tax credits for start-up or expanding businesses  6 EQUITY OFFERINGS/EQUITY SHARES The business sells stock directly to the public. It can raise substantial amounts of funds.  7 IPOs Initial Public Offerings (IPOs) are use when companies have profitable operations, management stability, and strong demand for their products or services. 8 WARRANTS/BILLS A warrant is a security that grants the owner of the warrant the right to buy stock in the issuing company at a pre-determined price at a future date 9 BANKS AND OTHER COMMERCIAL LENDERS Most lenders require a solid business plan, positive track record, and plenty of collateral. These are usually hard to come by for a start-up business.  10 COMMERCIAL FINANCE COMPANIES Business does not have substantial personal assets or collateral, a commercial finance company may not be the best place to secure financing.  11BONDS/ DEBENTURE Bonds are different from other debt financing instruments because the company specifies the interest rate and when the company will pay back the principal  12 LEASE/ RENT It is a legal agreement between two parties that specifies the terms and conditions for the rental use of a tangible resource such as a building and equipment 13 COMMERCIAL PAPERS Commercial paper is an unsecured, short-term debt instrument usually issued at a discount from face value and reflects prevailing market interest rates.  14 BANK OVERDRAFT A bank overdraft occurs when someone withdraws more money from their account than is available. This is also referred to as the account being overdrawn 15 ASSET BASED FINANCING It is a mortgage of fixed assets such as land, building, machinery and factory  16 PRIVATE PLACEMENT It is the sale of securities to a relatively small number of select investors as a way of raising capital. Usually large banks, mutual funds, insurance companies THANK YOU!