This document discusses various options for financing a business, including forms of equity such as sole proprietorships, partnerships, private and public limited companies, and shares/equity. It also discusses forms of debt financing such as term loans, bonds/debentures, and innovative debt instruments. Key sources of funding discussed include angel investors, venture capital, and private equity. Important aspects covered include features of shares and debt instruments, the issue process for shares, covenants for loans, and credit ratings for bonds.

1. STARTING A BUSINESS

2. SOLE PROPREITORSHIP

3. PARTNERSHIP

4. PRIVATE LIMITED COMPANY

5. PUBLIC LIMITED COMPANY

6. FINANCING FOR THE BUSINESS

7. ANGEL INVESTOR
• Invest money in seed,
startup and early stage
companies
• Invest time in
Entrepreneurs and their
companies
• Business acumen
• Mentoring and
coaching
• Serve on boards
• Make business
introductions

8. ANGEL INVESTOR
• Often successful,
exited entrepreneurs
or retired business
persons – active
investors
• Accredited Investors
• Angels invest their
own money

9. VENTURE CAPITAL
• Money provided by investors to
start-up firms and small
businesses with perceived long-
term growth potential.
• This is a very important source of
funding for start-ups that do not
have access to capital markets.
• It typically entails high risk for
the investor, but it has the
potential for above-average
returns.
• Success Rate is around 10%

10. VENTURE CAPITAL
• Venture capital can also include
managerial and technical expertise.
• Most venture capital comes from a
group of wealthy investors,
investment banks and other
financial institutions that pool such
investments or partnerships.
• This form of raising capital is
popular among new companies or
ventures with limited operating
history, which cannot raise funds
by issuing debt.
• The downside for entrepreneurs is
that venture capitalists usually get
a say in company decisions, in
addition to a portion of the equity.

11. PRIVATE EQUITY
• Private equity consists of investors
and funds that make investments
directly into private companies or
conduct buyouts of public companies
that result in a delisting of public
equity.
• Capital for private equity is raised
from retail and institutional investors,
and can be used to fund new
technologies, expand working capital
within an owned company, make
acquisitions, or to strengthen a
balance sheet.

12. PRIVATE EQUITY
• The majority of private equity
consists of institutional investors
and accredited investors who can
commit large sums of money for
long periods of time.
• Private equity investments often
demand long holding periods to
allow for a turnaround of a
distressed company or a liquidity
event such as an IPO or sale to a
public company.

13. SHARES/EQUITY

14. SHARES
Types
Authorised Share Capital Authorised share capital is the number
of ordinary shares capital that a firm can raise without further
shareholder approval.
Issued Capital The portion of the authorised capital offered by the
company to the investors is the issued capital.
Subscribed Share Capital Subscribed share capital is the number
of share (capital) outstanding.
Paid-up Capital The actual amount paid by the shareholders is the
paid-up capital.
Par (face) Value Par (face) value is a value arbitrarily placed on the
shares.

15. FEATURES OF SHARES
Residual claim to income
Residual claim on assets
Right to control
Pre-emptive rights
Limited liability.

16. ISSUE OF SHARES
IPO
FPO
RIGHTS ISSUE
PREFERENCE SHARES
QIB

17. IMPORTANT POINTS IN ISSUE OF
SHARES
BOOKBUILDING
SEBI
MERCHANT BANKERS
STOCK EXCHANGES

18. DEBT

19. FEATURES OF TERM LOANS
MATURITY
NEGOTIATED
SECURITY / COLLATERAL
COVENANTS

20. TYPES OF COVENANTS
• ASSET RELATED
• LIBILITY RELATED
• CASH FLOW RELATED
• CONTROL RELATED
NEGATIVE
• PROVIDING INFORMATION
• MAINTAINENCE
• SINKING FUND
POSITIVE

21. FEATURES OF BOND / DEBENTURE
Attributes
As a long-term source of borrowing, debentures have some
contrasting features compared to equities .
Trust Indenture When a debenture is sold to investing public, a trustee
is appointed through an indenture/trust deed.
Trust (bond) indenture is a complex and lengthy legal document
stating the conditions under which a bond has been issued.
Trustee is a bank/financial institution/insurance company/ firm of
attorneys that acts as the third party to a bond/debenture indenture to
ensure that the issue does not default on its contractual responsibility
to the bond/ debentureholders.
Interest The debentures carry a fixed (coupon) rate of interest, the
payment of which is legally binding/enforceable. The debenture
interest is tax-deductible and is payable annually/semi-
annually/quarterly.

22. IMPORTANT POINTS ABOUT
BONDS / DEBENTURE
MATURITY
SINKING FUND
CALL / PUT OPTION
SECURITY
CONVERTIBILITY
CREDIT RATING
CLAIM ON INCOME AND ASSETS

23. INNOVATIVE DEBT INSTRUMENTS
ZERO COUPON BONDS
DEEP DISCOUNT BONDS
SECURED PREMIUM NOTES
FLOATING RATE BOND
CALL / PUT BONDS
FCCB