• Save
Chapter 13
Upcoming SlideShare
Loading in...5
×
 

Like this? Share it with your network

Share

Chapter 13

on

  • 781 views

 

Statistics

Views

Total Views
781
Views on SlideShare
775
Embed Views
6

Actions

Likes
0
Downloads
0
Comments
0

1 Embed 6

http://www.slideshare.net 6

Accessibility

Upload Details

Uploaded via as Microsoft PowerPoint

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment

Chapter 13 Presentation Transcript

  • 1. CHAPTER 13 DISCUSSION QUESTIONS 1) Explain the difference & the advantages/disadvantages of equity capital & debt capital. 2) Discuss the following sources of equity capital: A) Angels B) Corporate Venture Capital C) Venture Capital Companies 3) Explain the following federal loan programs aimed at small businesses: A) EDA B) HUD C) USDA D) SBIR E) STTR
  • 2.
    • CAPITAL
    • -”ANY FORM OF WEALTH EMPLOYED TO PRODUCE MORE WEALTH.”
    • -3 MAIN FORMS
    • CASH
    • INVENTORY
    • EQUIPMENT
  • 3.
    • ENTREPRENEURS NEED 3 DIFFERENT TYPES OF CAPITAL
    • FIXED CAPITAL
    • WORKING CAPITAL
    • GROWTH CAPITAL
  • 4. 1) FIXED CAPITAL -”CAPITAL NEEDED TO PURCHASE A COMPANY’S PERMANENT OR FIXED ASSETS.” -MAIN TYPES OF PERMANENT/FIXED ASSETS: 1) LAND 2) BUILDINGS 3) EQUIPMENT -MONEY INVESTED IN FIXED ASSETS TENDS TO BE FROZEN BECAUSE IT CANNOT BE USED FOR ANY OTHER PURPOSE.
  • 5.
    • 2) WORKING CAPITAL
    • -”CAPITAL NEEDED TO SUPPORT A COMPANY’S SHORT-TERM OPERATIONS.”
    • -CURRENT ASSETS MINUS CURRENT LIABILITIES.
    • -WORKING CAPITAL IS NORMALLY USED TO:
    • BUY INVENTORY.
    • PAY BILLS.
    • FINANCE CREDIT SALES.
    • PAY WAGES & SALARIES.
    • TAKE CARE OF UNEXPECTED EMERGENCIES.
  • 6.
    • 3) GROWTH CAPITAL
    • -”CAPITAL NEEDED TO FINANCE A COMPANY’S GROWTH OR EXPANSION IN A NEW DIRECTION.”
    • -GROWTH CAPITAL FINANCES:
    • EXPANSION OR PURCHASING NEW BUILDINGS
    • HIRING ADDITIONAL WORK FORCE
    • INCREASING INVENTORY
  • 7. EQUITY CAPITAL VS DEBT CAPITAL FINANCING THE CAPITAL REQUIREMENTS OF A START-UP BUSINESS
  • 8.
    • DEBT CAPITAL
    • -”THE FINANCING THAT A SMALL BUSINESS OWNER HAS BORROWED & MUST REPAY.”
    • -FEW ENTREPRENEURS HAVE ENOUGH SAVINGS TO COVER START-UP COSTS, SO THEY MUST RELY ON SOME FORM OF DEBT CAPITAL TO LAUNCH THEIR COMPANIES.
    • PRIMARY ADVANTAGE:
    • -ENTREPRENEURS KEEP TOTAL OWNERSHIP & CONTROL OF BUSINESS.
    • PRIMARY DISADVANTAGE:
    • -SMALL BUSINESS LOANS ARE DIFFICULT TO OBTAIN.
  • 9.
    • EQUITY CAPITAL
    • -”CAPITAL THAT REPRESENTS THE PERSONAL INVESTMENT OF THE OWNER(S) OF A COMPANY.
    • -SOMETIMES CALLED RISK CAPITAL.
    • -PRIMARY ADVANTAGE:
    • DOES NOT HAVE TO BE PAID BACK LIKE A LOAN DOES.
    • -EQUITY INVESTORS ARE ENTITLED TO SHARE IN THE COMPANY’S EARNINGS & UUALLY HAVE A VOICE IN THE COMPANY’S FUTURE DIRECTION.
    • -PRIMARY DISADVANTAGE:
    • THE ENTREPRENEUR MUST GIVE UP SOME, SOMETIMES MOST, OF THE OWNERSHIP IN THE BUSINESS TO OUTSIDERS.
    • -GIVING UP CONTROL OF A COMPANY FOR AN ENTREPRENEUR IS AN OXYMORON.
  • 10. SOURCES OF EQUITY FINANCING
  • 11. ANGELS -”WEALTHY INDIVIDUALS WHO INVEST IN BUSINESS START-UPS IN EXCHANGE EQUITY STAKES IN THE COMPANIES.” -TODAY, THE LARGEST SOURCE OF EXTERNAL FINANCING FOR COMPANIES IN THE START-UP PHASES.
  • 12. VENTURE CAPITAL -”FUNDS MADE AVAILABLE FOR STARTUP FIRMS WITH EXCEPTIONAL GROWTH POTENTIAL.” CORPORATE VENTURE CAPITAL -LARGE CORPORATIONS THAT INVEST IN FLEDGLING COMPANIES, MOST OFTEN THOSE IN THE PRODUCT DEVELOPMENT & SALES GROWTH STAGES. VENTURE CAPITAL COMPANIES -PRIVATE, FOR-PROFIT COMPANIES THAT PURCHASE EQUITY POSITIONS IN YOUNG BUSINESSES THEY BELIEVE HAVE HIGH-GROWTH & HIGH-PROFIT POTENTIAL.
  • 13.
    • THE BOSTON BEER COMPANY: BREWING THE AMERICAN DREAM
    • Small business loans from $500-$25,000: Food and beverage small business owners can get the capital needed to expand or start a business, purchase inventory or equipment, market a business, pay licensing fees, etc.
    • Financial and business education seminars: Through free seminars, The Boston Beer Company gives top-line guidance, answers questions and helps solve small business challenges.
    • Speed coaching events: Small business owners can meet with The Boston Beer Company's employees to gain customized business advice on a range of topics: marketing, distribution, accounting, etc.
  • 14. FEDERAL LOAN PROGRAMS
  • 15. ECONOMIC DEVELOPMENT ADMINISTRATION (EDA) -A BRANCH OF THE COMMERCE DEPARTMENT, THAT OFFERS LOAN GUARANTEES TO CREATE NEW BUSINESS & TO EXPAND EXISTING BUSINESSES IN IN AREAS WITH BELOW-AVERAGE INCOME & HIGH UNEMPLOYMENT.
  • 16. DEPARTMENT OF HOUSING & URBAN DEVELOPMENT (HUD) -SPONSORS LOAN PROGRAMS TO ASSIST QUALIFIED ENTREPRENEURS TO START SMALL BUSINESSES THAT WILL STRENGTHEN THE LOCAL ECONOMY . -GRANTS ARE AIMED AT CITIES & TOWNS IN NEED OF REVITALIZATION & ECONOMIC STIMULATION.
  • 17. RURAL BUSINESS-COOPERATIVE SERVICE (RBS) -PROVIDED BY THE U.S. DEPARTMENT OF AGRICULTURE. -A FINANCIAL ASSISTANCE PROGRAM OPEN TO ALL TYPES OF BUSINESSES DESIGNED TO CREATE NONFARM EMPLOYMENT OPPORTUNITIES IN RURAL AREAS.
  • 18. -A PROGRAM OF 11 FEDERAL AGENCIES THAT AWARD CASH GRANTS OR LONG-TERM CONTRACTS TO COMPANIES WANTING TO INITIATE OR TO EXPAND THEIR RESEARCH & DEVELOPMENT EFFORTS. -SBIR GRANTS GIVE INNOVATIVE SMALL COMPANIES THE OPPORTUNITY TO ATTRACT EARLY-STAGE CAPITAL INVESTMENTS WITHOUT HAVING TO GIVE UP SIGNIFICANT EQUITY STAKES OR TAKING ON BURDENSOME LEVELS OF DEBT. SMALL BUSINESS INNOVATION RESEARCH PROGRAM (SBIR)
  • 19. SMALL BUSINESS TECHNOLOGY TRANSFER PROGRAM (STTR) -USES COMPANIES TO EXPLOIT THE VAST RESERVOIR OF COMERCIALLY PROMISING IDEAS THAT ORIGINATE IN UNIVERSITIES, FEDERALLY FUNDED R&D CENTERS, & NONPROFIT RESEARCH INSTITUTIONS.