Please enable JavaScript.
Coggle requires JavaScript to display documents.
Sources of Financing: Equity and Debt - Coggle Diagram
Sources of Financing: Equity and Debt
Difference between equity capital and debt capital
Equity Capital
Represents the personal investment of the owner(s) in the business.
Debt Capital
Must be repaid with interest and is carried as a liability on the company’s balance sheet.
Sources of Equity Financing
Crowd funding
Accelerators
Friends and family members
Angels
Personal savings
Corporate venture capital
Venture capital companies
Public stock sale
Characteristics of successful IPO candidates
3 to 5 years of audited financial statements that meet or exceed SEC standards
Sound management team with experience and a strong board of directors
Scalability
Solid position in a rapidly-growing industry
Consistently high growth rates
Steps to take a company public
Wat to "go effective"
Road show
Negotiate a letter of intent
Meet all state requirements
Choose the underwriter
Sources of debt capital
Nonbank sources of debt capital
Asset-based lenders
Vendor financing
Equipment suppliers
Private placements
Commercial banks
Lenders of first resort for small business
Short term loans come from home equity loans, lines of credit
Immediate and Long-term loans come from installment loans and term loans
Other Methods of Financing
Merchant cash advance
- A provider pre-purchases credit and debit card receivables at a discount.
Loan brokers
- Specialize in helping small companies find loans by tapping into a wide network of lenders.
Leasing
- Lease assets rather than buying them to avoid tying up capital.
Factoring Accounts receivable
- selling accounts receivable outright