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SOURCES OF FINANCE
      BUSS1
      Ms Rose
For a start-up!
• Remember the focus for Buss1 is a new
  business starting up.
• Therefore the source of finance has to be
  appropriate to the scenario.
• Finding finance can often be a major problem
  to an entrepreneur.
Raising finance for start-up requires
             careful planning
 The entrepreneur needs to decide:
• How much finance is required?
• When and how long the finance is needed for?
• What security (if any) can be provided?
• Whether the entrepreneur is prepared to give up
  some control (ownership) of the start-up in
  return for investment?
taking account of these key areas:

 • Set-up costs (the costs that are incurred before the business
   starts to trade)
 • Starting investment in capacity (the fixed assets that the
   business needs before it can begin to trade)
 • Working capital (the stocks needed by the business – e.g. raw
   materials + allowance for amounts that will be owed by
   customers once sales begin)
 • Growth and development (e.g. extra investment in capacity)
SINCE the outbreak of the credit crunch, the tortured
issue of small-business lending has become more and
more complex.
On the one hand, the banks swear blind they are open
for business but claim they face a lack of demand from
small enterprise. On the other side of the fence, small
businesses complain they are being turned away or the
rates on offer are extortionate. From The Scotsman –
18/10/11
GRANTS & OTHER
GOVERNMENT SUPPORT




         Friends and Family
BANKS
• The logical place to start.
• Many business start-ups want the reassurance
  given by face-to-face meetings at their local
  bank.
• A bank loan is a formal arrangement.
                      http://www.smarta.com/advice/business-
                      finance/start-up-finance/how-to-get-bank-
                      finance---advice-for-start-ups
AKA Loan Capital
• A form of external finance.
• 2 main types:
1. Bank Loan
2. Overdraft
• Require a sound Business Plan and probably
   Collateral
• Both have advantages and disadvantages
Friends and Family
• Often the only realistic source for a start-up
• Has obvious potential pitfalls


• http://www.youtube.com/watch?v=pWNDVln
  3wd4&feature=fvsr
Business Angels
http://www.youtube.com/watch?v=9AyKoUUB_d8
Business angels are wealthy, entrepreneurial
  individuals who provide capital in return for a
  proportion of the company equity. They take a
  high personal risk in the expectation of owning
  part of a growing and successful business.
Suitable for between £10000 - £250000
Venture Capitalists
• http://www.youtube.com/watch?v=azRzqI3BJ2A&feature=
  related
• Venture capital = long-term, committed share capital.
• Invested in exchange for an equity stake in the business.
• The venture capitalist's return is dependent on the growth
  and profitability of the business. This return is generally
  earned when the venture capitalist "exits" by selling its
  shareholding when the business is sold to another owner.
• Usually a specialist business NOT an individual
Grants & Government Support
• These maybe available if the business is
  located in a deprived area.
• There is strong competition for grant schemes.
• Grants usually only cover a percentage of the
  costs - matching funds have to be provided.
Your own money
• Arguably the most important – if you will not
  risk your assets in your enterprise; who else
  will?
• Credit Cards, Savings, Inheritance, Mortgaging
  home, Selling assets.
Case study
• http://www.smarta.com/advice/business-
  finance/start-up-finance/how-i-raised-
  alternative-finance
• http://www.tutor2u.net/business/quiz/startu
  psmarkets/quiz.html

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Sources of finance

  • 1. SOURCES OF FINANCE BUSS1 Ms Rose
  • 2. For a start-up! • Remember the focus for Buss1 is a new business starting up. • Therefore the source of finance has to be appropriate to the scenario. • Finding finance can often be a major problem to an entrepreneur.
  • 3. Raising finance for start-up requires careful planning The entrepreneur needs to decide: • How much finance is required? • When and how long the finance is needed for? • What security (if any) can be provided? • Whether the entrepreneur is prepared to give up some control (ownership) of the start-up in return for investment?
  • 4. taking account of these key areas: • Set-up costs (the costs that are incurred before the business starts to trade) • Starting investment in capacity (the fixed assets that the business needs before it can begin to trade) • Working capital (the stocks needed by the business – e.g. raw materials + allowance for amounts that will be owed by customers once sales begin) • Growth and development (e.g. extra investment in capacity)
  • 5. SINCE the outbreak of the credit crunch, the tortured issue of small-business lending has become more and more complex. On the one hand, the banks swear blind they are open for business but claim they face a lack of demand from small enterprise. On the other side of the fence, small businesses complain they are being turned away or the rates on offer are extortionate. From The Scotsman – 18/10/11
  • 6. GRANTS & OTHER GOVERNMENT SUPPORT Friends and Family
  • 7. BANKS • The logical place to start. • Many business start-ups want the reassurance given by face-to-face meetings at their local bank. • A bank loan is a formal arrangement. http://www.smarta.com/advice/business- finance/start-up-finance/how-to-get-bank- finance---advice-for-start-ups
  • 8. AKA Loan Capital • A form of external finance. • 2 main types: 1. Bank Loan 2. Overdraft • Require a sound Business Plan and probably Collateral • Both have advantages and disadvantages
  • 9. Friends and Family • Often the only realistic source for a start-up • Has obvious potential pitfalls • http://www.youtube.com/watch?v=pWNDVln 3wd4&feature=fvsr
  • 10. Business Angels http://www.youtube.com/watch?v=9AyKoUUB_d8 Business angels are wealthy, entrepreneurial individuals who provide capital in return for a proportion of the company equity. They take a high personal risk in the expectation of owning part of a growing and successful business. Suitable for between £10000 - £250000
  • 11. Venture Capitalists • http://www.youtube.com/watch?v=azRzqI3BJ2A&feature= related • Venture capital = long-term, committed share capital. • Invested in exchange for an equity stake in the business. • The venture capitalist's return is dependent on the growth and profitability of the business. This return is generally earned when the venture capitalist "exits" by selling its shareholding when the business is sold to another owner. • Usually a specialist business NOT an individual
  • 12. Grants & Government Support • These maybe available if the business is located in a deprived area. • There is strong competition for grant schemes. • Grants usually only cover a percentage of the costs - matching funds have to be provided.
  • 13. Your own money • Arguably the most important – if you will not risk your assets in your enterprise; who else will? • Credit Cards, Savings, Inheritance, Mortgaging home, Selling assets.
  • 14. Case study • http://www.smarta.com/advice/business- finance/start-up-finance/how-i-raised- alternative-finance • http://www.tutor2u.net/business/quiz/startu psmarkets/quiz.html