Innovative sources of finance

  • 396 views
Uploaded on

Venture Capital and Loan Syndication, the two prominent innovative finance sources are discussed.

Venture Capital and Loan Syndication, the two prominent innovative finance sources are discussed.

  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
  • Great Work!!
    Are you sure you want to
    Your message goes here
No Downloads

Views

Total Views
396
On Slideshare
0
From Embeds
0
Number of Embeds
0

Actions

Shares
Downloads
14
Comments
1
Likes
4

Embeds 0

No embeds

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
    No notes for slide

Transcript

  • 1. Venture Capital & Loan Syndication Innovative Sources of Finance
  • 2. Innovative Sources
  • 3. • Innovative sources and mechanisms of funding are non-traditional modes of financing • Finance is made available to the Business Organisations breaking the conventions • All the innovative sources are evolved in response to the magnified and divergent need for Finance What are Innovative Sources?
  • 4. • Non – Traditional • Tailor Made • Mobility • Finance on Demand Why called ‘Innovative’?
  • 5. Venture Capital
  • 6. • Financing a new, growing, or troubled business • Knowledge of the significant risk associated • Investment in exchange for an equity stake • Expects a better-than-average return Meaning
  • 7. • Money provided by investors to start-up firms and small businesses with perceived long-term growth potential and substantially high risk , in exchange of an equity stake expecting a better than average return. Definition
  • 8. • New Business • Limited Operating History • No capital market access • Perceived long term growth potential Who opt VC?
  • 9. • Not necessarily just one wealthy financier • Ltd. partnerships with pooled investment capital • Small group of investors • Affiliate or subsidiary of a; 1) Large commercial bank 2) Investment bank or 3) Insurance company Who can be a Venture Capitalist?
  • 10. • Commercially Viable • Identifiable Market • Strong Management • Sustainable Competitive Advantage What do Venture Capitalist look for?
  • 11. • Participation in Equity • Long – Term loans • Participation in Management • Risky Capital • Exit Option Features
  • 12. Financing Equity Returns Participation in Equity
  • 13. Financing Equity Lock – Up Period Sale of Equity Long Term Loans
  • 14. Take part in the Board of Directors Provide Technical/ Technological Assistance Recruiting Key Executives Participation in Management
  • 15. Risky Capital
  • 16. Financing Commercial Viability Selling of Equity Exit Option
  • 17. The Funding Process 1) Business Plan Submission 2) Introductory Conversation /Meeting 3) Due Diligence 4) Term Sheets and Funding
  • 18. Types of Funding 1) Seed Capital 2) Start-Up Capital 3) Early Stage Capital 4) Expansion Capital 5) Late Stage Capital
  • 19. The ‘Apple’ Story..!
  • 20. Loan Syndication
  • 21. • Huge financial requirements • Involvement of greater risk • Low credit exposure levels • Mismatching Terms & Conditions Why loan syndication?
  • 22. • The process of involving Several different lenders in providing various portions of a loan. • Borrower requires a large sum of capital that may either be too much for a single lender to provide, or • May be outside the scope of a lender's risk exposure levels. • Multiple lenders together provides a single loan on agreed terms and rates through an agent - ARRANGER. Meaning
  • 23. • Syndicated loan is one that is provided by a group of lenders and is structured, arranged, and administered by one or several Institutional Lenders or investment banks known as arrangers. Definition
  • 24. • When there is huge requirement for fund, such as in case of; 1) Mergers 2. Acquisitions and 3) Buyouts When a Syndicated loan is opted?
  • 25. Borrower Arranger Syndicate Parties to a Syndicated Loan
  • 26. • Point of Contact • Monitor • Postman and Record Keeper • Paying Agent Duties of an Arranger
  • 27. Documenting the Loan
  • 28. • The Borrower appoints the Arranger via a Mandate Letter • The content varies according to whether; 1. The Arranger is mandated to use its "best efforts" to arrange the required facility or 2. If the Arranger is agreeing to "underwrite" the required facility. Mandate Letter/ Commitment Letter
  • 29. • The Mandate Letter will usually be signed with a Term Sheet attached to it. • The Term Sheet is used to set out the terms of the proposed financing prior to full documentation. • It sets out the parties involved, their expected roles and many key commercial terms Term Sheet
  • 30. Example : 1. Type of facilities 2. Facility amounts 3. Pricing 4. Term of the loan and 5. Covenant package
  • 31. • Prepared by both the Arranger and the borrower • Arranger forwards to potential syndicate members. • Includes description of the borrower's business, management, accounts, details of the proposed loan etc. • It is not a public document and all potential lenders that wish to see it usually sign a confidentiality undertaking. Information Memorandum
  • 32. • Prepared if the syndicate comes to a conclusion and borrower is agreed upon • It sets out the detailed terms and conditions on which the Facility is made available to the borrower. • The repayment structure, Interest rates, Covenant stipulations etc are drafted here Syndicated Loan Agreement
  • 33. • Made between borrower and arranger • Borrower has to pay the arranger a specific fee for its specialised services • Fee letter contains the rates and the conditions and structure of such payments. Fee Letters
  • 34. Term Loan Facility Revolving Loan Facility Types of Syndicated Loans
  • 35. Innovative Features
  • 36. • Realising Capital • Risk or Portfolio Management • Regulatory Capital Requirement • Crystallise a loss Selling participation in the Loan
  • 37. • Letter of credit • Swingline Facility • Overdraft Facility Other Features..
  • 38. What we’ve discussed...
  • 39. Questions??