There are two types of capital: debt and capital. Both types are typically used by companies during their lifetime. Lenders have different purposes than investors, so look at the various factors about the company when deciding whether to invest or make a loan
It's tough.
Debt is borrowed money, which must be repaid in a set period and generate income for the lender over that period. The lenders include not only banks but also leasing companies and facts. ..
It's tough. :
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There are two types of capital: debt and capital. Both types are typically used by companies during their lifetime. Lenders have different purposes than investors, so look at the various factors about the company when deciding whether to invest or make a loan
It's tough.
Debt is borrowed money, which must be repaid in a set period and generate income for the lender over that period. The lenders include not only banks but also leasing companies, factoring companies and even individuals.
And if the company can pay interest and generate enough cash to repay its principal. The growth potential of a company is secondary; the primary consideration is the basis of the company's performance and assets. Ordinary liabilities must be guaranteed against the assets of the company, and must generally be very secure against the assets of the owner of the company
I guarantee.
Company assets are usually not given the full carrying value of a loan guarantee. In other words, if your inventory has a book value of $ 50,000 (or costs you $ 50,000 to produce that inventory) the loan source is 50% to 75% of its value, which is why the loan source is You are not in your business, and you have to immediately clear the inventory, rather than selling it at market rates.
Accounts receivable, or money owed to you from customers who previously purchased the product but have not yet paid for it, will also be discounted. Using the same example, the $ 50,000 value of the receivables may only be worth 60% to 70% of its value to the source of the loan. If the customer can not pay the full amount to pay, or if the external loan source requires payment, they must pay for all the products And so ... equipment, land, buildings, furniture, The same general rules apply to what fixtures and other assets a company has.
Lenders often require that the personal property of the owner of the company be promised as a gesture of faith by the owner, as a contingency. If you don't believe in the source of the loan the company owner should have the ability of his / her own company to return the loan, obviously?
stock
Equity capital is the money given for the share of ownership of a company. Shares can be provided by individual investors. , Sometimes known as "Angel". , Venture capital companies, joint venture partners, sweats of the founders of the company Stock providers are interested in the growth potential of the company. Their purpose is to invest the amount now and get payoff rewards in five to one, or ten to one, three to five years. In other words, it is worth $ 100,000 $ 1,000,000 immediately if you are invested in the right company.
Since the purpose of an investor is different from that of a lender, the factors to evaluate when deciding whether to invest are different from the lender. Investors want to invest in companies that have the potential for rapid growth. The growth potential is based on the quality of the company's management, the strength of the product brand, the barriers to entry into competitors, and the market size of the product.
So, debt or equity capital?
The answer depends on the answers to some questions. At what stage is your company? What is your company's financial position? How much capital do you need? What are the constraints, and funding sources put in the company's daily operations? And finally, what kind of impact does the funding source have on the ownership of the company?
Why does the company need additional capital?
The reason why funds are needed, or how they are put to use, is to lend themselves to debt rather than own equity or vice versa Debt is often the company's daily It is the source of funds for work or refinances the current loan. Extended capital can be debt or equity. In most cases, you start the funds that come from the stock source. The turnaround situation of refinancing arrears to cover the deficit in earnings may be either, but in these cases, the funding comes with a high price
At what stage is your company?
Companies grow through several different stages: seeding, startup, first stage, and second stage. The stage of the company is an indicator of the associated risk. Neither debt nor shares will be banned at any stage, but older and more established companies are usually at much risk.
Seed Stage-The ideas for the product or company are in the mind of the founder, but the substantial research required to determine if the idea is viable
Initiation--The company has a business plan, defined products and basic structure, but little revenue is generated. The product may still be just a prototype.
First Stage-The product is market ready or is generating some income. The structure of the company is in place.
Second stage-full-scale production. The company's products are marketed and accepted. The company is ready for a major public introduction of products or introduction of a second product.
"Ts" "Ts" "Ts" bonds.
Turnaround-The company has been operating for several years, but is unprofitable. It refers to companies that are not only hard turnarounds but also unprofitable, but with little hope of returning to a positive position without major restructuring and the position of a cash deficit
What is your company's financial position?
In certain circumstances, the company's financial condition suggests a type of capital over others. If the company needs all the cash to fund growth, the company can not afford to pay interest and principal, so the loan is not viable The company just to cyclical increase of order It does not make sense to bring a fair investor if the credit line needs to be funded.
Lenders are looking at asset-based to secure loans, and cash generated to pay interest. They also look at the owner's debts and debts very often, looking at the other debts or liabilities that the company has. The old saying that it's easiest to get a loan when you don't need it is close to the truth. Strong balance sheets, top heavy in cash, and light on the side of debt are easy to raise funds.
Investors view a sound corporate review of the product and sales fronts with a comprehensive general balance sheet. Companies that have shown positive trends in the past are looking favorably. However, the prospects of the company's products and market are as important to investors as past performance. The somewhat volatile past companies of the currently booming companies are probably more desirable to fair investors than the large performance of the companies that are downslide.
But if your company is a startup and there isn't that much if you have history? Then other factors such as the following are considered:
How much money has the owner donated to the company?
How a strong management team
How is a management team dedicated to success.
Any other unique asset, such as patents, trademarks, goodwill etc. may be available.
What are the barriers to entering the market?
While both debt and equity come to prices, companies must generate enough cash to return the principal of the loan and the ongoing interest. Capital does not have to be repaid according to a fixed schedule. Equity investors are looking for long-term returns.
How much capital do you need?
The small amount of capital required for a short time is often not an attractive situation for either traditional debt or equity sources. Lenders are not interested in cost loans as much as they can handle income as they can generate them. Investors feel that the due diligence needed to raise a small amount of funding is about the same as for raising more funding.
On the other hand, very large amounts of capital can only be obtained if they are divided into stages to be funded based on the achievement of performance levels. For example: Medical progress, as we now know it, has the idea for a diagnostic test that will revolutionize the treatment of all diseases. However, you need $ 35,000 to prepare the product on the market. The first funding, the literature and patents to determine the size of the market demand for the product, to see if anyone else is working on the same idea, no one is working on the idea If the market shows that it is the office of all doctors worldwide, the second stage of the $ 500,000, if the laboratory technicians to develop a prototype testing equipment by the end of six months Then, for $ 1,000,000 or more, develop a working prototype, and it works for $ 750,000 when the working prototype is patented and is available with FDA approval and independent testing.
What are the constraints, and funding sources put in the company's daily operations?
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