Many start-up businessmen face a number of problems in terms of attracting company financing. At different stages of business development, these problems may be different. In this article, we will talk about the main problems and how to prepare for finding investments, lending, issuing bonds, shares or selling a business.
Many startups often choose the wrong form of attracting investments. Many give a share in the authorized capital in exchange for money.
So, an entrepreneur raises $30 million in exchange for a 30% stake in the company. The authorized capital is 100 thousand dollars. The company’s cash desk receives 30 thousand dollars in the form of the sale of 30% of the authorized capital. The bulk of the investment in cash somehow winds up in the company. For example, under a loan agreement.
As a result, the founder gives 30% of the company and owes several tens of millions of dollars according to the documents. He puts himself and the business in complete dependence on the mood of the investor.
To act more competently, it is enough to understand that any business does not begin with an authorized capital, but with a well-developed idea, knowledge of the market, and a resource base.
You increase the authorized capital and financial attractiveness of the project, protect intellectual property and maintain sufficient independence from the investor. Money comes to the company in full compliance with the law. And if you need to earn money quickly, you can try live sports betting. Despite the possible risks, this is a good way to make money easily.
When a company has assets and financial indicators grow, it becomes interesting for banks. Bank sales managers first lure young businessmen like sailors’ mermaids and offer them to try financial products at very favorable terms. However, approvals often take two to four months, and in most cases banks refuse small companies or offer a rate a few percent higher than stated.
Entrepreneurs find themselves in a disadvantageous position: time and resources are wasted, contracts with partners for a future loan are concluded, but the promised money is either not available or it is expensive.
Before you apply for a bank loan, check what proportion of equity is, because it reflects the financial strength of your business, and not the amount of revenue or profit.
Challenge the CFO to structure the balance sheet in a way that maximizes equity. This can be done through intellectual property.
More mature companies with a turnover of several billion rubles can raise financing through the issuance of securities, such as bonds. The following scenario is common here: a company hires specialists to conduct Due Diligence, and in the process it turns out that a number of assets have no value. Overdue receivables, illiquid stocks are no longer assets, but ballast that will have to be written off at the expense of profit. Often companies do not do this, since the write-off amount is greater than profit, and this operation will take the company to a loss.
As a result, the company’s rating is reduced, and investment attraction rates are rising. And due to the decrease in the company’s profits, there may be problems with the payment of dividends to shareholders.
It is important to understand that assets are not only machines and equipment, real estate or servers, but also technologies, recipes, flow charts, design documentation, methodologies, standards, company internal regulations, IT systems, and so on. All documentation, the absence of which would lead the business into chaos, is the know-how of the company. If they meet the criteria of protectability and have commercial value, they must be evaluated and put on the balance sheet as part of intangible assets.