Raising Finance

1. By Ben Youn
Copyright 2014 Quantum Business House
WELCOME to QUANTUM BUSINESS HOUSE

2.  2 hours for each session
 10 minutes tea time
 Bathroom & Kitchen
 Today’s Speaker
 Please network each other
 Future Plan
- Business Forum
- Networking Events
- Business Mentoring
Copyright 2014 Quantum Business House

3. 1. Setting up business structure (June 04)
2. Buying a business (June 11)
3. Business Planning (June 18)
4. Marketing (June 25)
5. Raising Finance (July 02)
6. Financial Management (July 09)
7. Tax system and compliance issues (July 16)
8. Risk management (July 23)
9. Financial Health Check (July 30)
10. Business Evaluation (August 06)
Copyright 2014 Quantum Business House

4. Copyright 2014 Quantum Business House

5.  Equity
- Owner’s capital (ordinary shares or
preference shares)
- Investments (e.g. angel investors)
- Trust Funds
- Partnership Capital
Copyright 2014 Quantum Business House

6.  Debt
- Bank overdraft
- Bank loan
- Convertible notes
- Factory financing
Copyright 2014 Quantum Business House

7.  Normally no securities required (greater risks)
 Aiming profit distributions and greater
business valuation (Return on Investments)
 Rank behind all other secured and unsecured
creditors when the business winds up i.e. loss
of capital and ROI.
 Bear risks of finding a new buyer to exit the
investments
Copyright 2014 Quantum Business House

8.  Default risk
- Unable to pay the interests
- Unable to repay the principal when maturity
arrives.
 Security requirements to mitigate the risks
such as mortgages over property fixed charge
or debenture or specific assets (e.g. Account
Receivable)
Copyright 2014 Quantum Business House

9.  Sale of shares or units
 The amount of return of initial funds invested
will depend on the change in value of the
business and the ability to find a willing buyer
or appropriate exiting strategy
Copyright 2014 Quantum Business House

10.  Based on the terms of repayment of the fund
borrowed
 The fund will be repaid either instalments
over the loan period or at the end of the
term.
 The business will need to generate enough
fund from the profits to meet the repayment
commitments.
 Debtor financier does not share the risks of
the business or fruits of the business.
Copyright 2014 Quantum Business House

11.  Debt
- Higher gearing structure means bigger
commitments to external parties (interests)
- Income tax advantage (tax deductible)
- Reduced profits
 Equity
- Additional room for debt finance
- Increased profits (compared to debt finance)
Copyright 2014 Quantum Business House

12.  Combination of two?
 Convertible notes?
 Consideration also requires:
- The ability to recognise an investor’s
interests in operating the business with
voting right.
- Your attitude to lose 100% control position
- The need to reduce the risk associated with
the gearing level.
- Is your business attractive to investors?
Copyright 2014 Quantum Business House

13.  Review of existing debt finance arrangement
on a regular basis.
 Changing lending institution with better
options including different debt product,
increasing or decreasing the amount of
borrowing, changing the repayment amount
or timing etc.
 New debt to pay off old debt
Copyright 2014 Quantum Business House

14.  Gaining a better interest rate
 Changing interest structure (e.g. from
variable to fixed)
 Gaining more flexible features in a facility to
meet your business needs
 Changing the financial cashflow commitment
 Releasing security over personal
asset/specific assets
Copyright 2014 Quantum Business House

15.  Dangers!!
- Fees (e.g. early exit fees or penalty)
- Costs of refinancing
- Changing in valuation of your security
 Benefits
- Access to increase in debt finance
- Consolidation of debt funding and cashflow
saving
- Restructuring security offering
Copyright 2014 Quantum Business House

16.  Bank manager (or loan officer)’s
recommendation then to credit manager
 Personal information
- Personal assets
- Tax returns
- Personal bank details
- Credit history
Copyright 2014 Quantum Business House

17.  Business historical information
- BAS statements
- Debtors and creditors lists
- Bank statements
- Any loan arrangements
 Forecast
- Cashflow forecast
- Profit and Loss forecast
- Balance sheet forecast
Copyright 2014 Quantum Business House

18.  Business Plan
 Purpose of the loan
 The amount of the loan
- Make sure you borrow right amount of money
 Term of the loan
 Servicing the loan
 Security of the loan
 Presentation and consultation with business
banker
Copyright 2014 Quantum Business House

19.  Financial Management
 Tax system and compliance issues
 Risk management
 Financial Health Check
 Business Evaluation
Copyright 2014 Quantum Business House