The document discusses various methods for raising capital for a business including equity financing through selling shares, loans, and lines of credit. It notes the costs, security requirements, and time involved in setting up different financing options. The document also discusses establishing bank accounts for businesses and provides tips for forecasting sales, budgets, profits, and cash flow to help with financial planning and management.

1. Finance
Scenario Five

2. Raising capital
You need to think of ways of raising funds for your
business to grow, but these methods have their
pitfalls.
• How are you going to use the funds?
– Successful new business attract investors v. Struggling
SME’s
– Buying assets allows for HP or leasing on contract
• Term duration
– Long term – selling equity or low interest loans
– Short term – flexibility is more important (overdrafts)

3. • Cost elements
– Interest rates are applicable on all loans
– Set up fees (bank or solicitor)
– Time element – set up of deal, negotiations of T&C’s,
preparing documents
• Security
– Lenders don’t want to lose cash
– Home, car, assets as security back-up
• Shares available
– LTD companies – investment from outside the
business (shares)
– Willing to give up % of business for some control??

4. Banking
• Bank accounts
– Earn interest
– Gain overdraft
– Get advice
– Long term loans
• Costs
– Most banks – introductory period 12-18 months
(charges waived)
– After this period: fixed charges for each transaction;
fixed monthly fee; no charges as long as there is
certain amount in account

5. • How to set up
– Lengthy process
– Check your ID as an SME
– Can take up to a month to get the cash!!!
• Choices you have
– High Street banks offer all standard business a/c’s
– Some banks run a business service offering use of
the phone, internet or mail (not ideal for if you
have lots of cash, advice is less, but cheaper)
– Large banks have also made this an option for
businesses

6. Forecasting
Predict future activity to avoid problems before
they occur. Forecasting helps make informed
financial management decisions.
• Sales targets
– New businesses will find predicting sales targets
difficult
– Use market research to predict sales
• Budgets
– Estimate costs for different areas of the business
– Contingency plans in place for an eventualities

7. • Profit forecast
– Sales for the period minus production and fixed
costs=profit
– Figures used are at the point the sale is made
• Cash flow forecast
– Calculates the cash in and out of the account
– Based on when the money changes hands from
customer to business
– Helps highlight any shortage of cash