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Raising finance- in small and medium sided businesses - Coggle Diagram
Raising finance- in small and medium sided businesses
organisation size and finance employed
no strict relationship between and organisation and its chosen finances
small businesses often use lease finance and equity finance
liquidity and capital
Equity and debt finance prices capital
finance provides liquidity
nominal value of share, price when stock is issued,different from one company to another
market value= value of share on the market currently
venture capital and private equity
this is when someone who isnt part of comapny management provides a large amount of finance to a new company- usually through a venture capital company
finance though retained earnings and working capital management
working capital
made of revcivables
cash at bank
assets(stock)
retained earnings from previous business activities
first few years of a business may see no or limited probability due to needing to retain the profits for working capital
small businesses also have limited working capital
negative working capital
money in capital is less than the money waiting to be received in parables, as well as outstanding amounts due to creditors.
creditors providing finance for the business
small businesses are vaunrable to making late payments to by customers.
financing through debt factoring
selling accounts receivables( invoices) to a third party factoring house. short term source of finance
the factoring company is good to use as it gives you cash now, but they take a percentage profit from the inovces that need to be paid
can also effect relationships with customers, it can be impersonal
bank overdrafts and bank facility finances
for small business the only finance available might be overdrafts
interest paid on overdraft
review period of overdraft
size of overdraft
governance on financial performance( conditions from lenders
security provided- owners of smaller organisations usually
bank facility finance
large source of funds for small businesses with bad or no credit ratings.
syndicated financing, borrowing from multiple banks
raises legal issues as can be comprised of banks from all over the world and different regulations and laws.
interest rate paid is usually linked to the three month money market rate LIBOR
average of interests rates banks are lending to eahcother . calculated by the British bank association. it is calculated in 10 currencies. over a period of three months
Leasing finance
bank requires an asset a business needs and leases it to the company. sometimes everntually purchasing the asset from the bank.
capital lease- also called a financial lease
operating lease, things such as operating machines
Equity finance
shares
ordinary shares , gives shareholders ownership of the company and should reciccve dividents payments
preference shares, same as ordinary shares but dividend is fixed and shareholders usually have votinr rights in the events of major issues effecting the company