Completing the finance-raising

Raising finance is often a complex process. Business management needs to assess several alternatives and then negotiate terms which are acceptable to the finance provider. The main, negotiating points are often as follows:

1. Whether equity investors take a seat on the board

2. Votes ascribed to equity investors

3. Level of warranties and indemnities provided by the directors

4. Financier's fees and costs

5. Who bears costs of due diligence.

 

Answer the questions.

1. When do businesses need to raise finance?

2. What are potential sources of finance?

3. What is the key consideration in choosing the source of finance?

4. What are the main differences between borrowed money and equity?

5. How is it possible to keep the financial risk of a business at an optimal level while raising finance?

6. What are the main types of finance?

7. What is venture capital intended for?

8. What are grants aimed at?

9. What is invoice discounting?

10. What are loans provided for?

11. What is an overdraft?

12. What are the main negotiating points while completing the finance-raising?

 

a) Buying expensive goods by.making regular payments over a period of time

b) Lending a business a sum of money equei to that owed to the business by its suppliers or customers

c) Money lent to start a new business

d) Allowing customers to take out more money from their bank than they had in it

e)Money borrowed on which interest is paid

f) Giving someone the right to use something for a period of time in return for payment

g) Money given to an organisation for a particular purpose, often by a government.

1 grant

2 venture capital

3 invoice discounting

4 hire purchase

5 leasing

6 loan

7 overdraft

Match the words and phrases to their meanings.

Complete the sentences with the best word from the box.

acquisitions administration venture business angel stake grants instalments invoice overdraft cash flow bankruptcy assets

 

1. Their company has.... of £70 million and liabilities of £40 million.

2. Repayment of the loan will be in ten ………. at three-month intervals.

3. Their bank warned that unless they repaid the …………. they could face legal action.

4. Unless the situation improves dramatically, our company will be forced to file for …………..

5. We are a group of financial advisers specialising in mergers and ……….

6. Surprisingly, BIT Inc. is selling off its 30 …….. in Kommerz Bank.

7. The company has been put into ………… and the chances that it will keep going are very slim.

8. Customers not paying bills on time caused a major………… problem.

9. You can raise finance against debts due from customers via ………. discounting.

10. We offered the.......... a 10% share in the profits and a seat on the board of directors.

11. The EU often awards development......... to its poorer members.

12. ……… capital is a general term for money that is lent to someone when they start a business.

 

Complete the text with the best word.

 

Microcredit

The term 'microcredit' is used to describe the extension of small loans to entrepreneurs too poor to qualify for traditional bank loans. It is often associated with the work of Professor Muhammad Yunus, who has ………….¹ many innovative programmes for the rural poor, several of which have been............² by the Bangladeshi government.

Although definitions of microcredit............³ from country to country, there are a number of common essential characteristics. First of all, loans are very small in size, and the target users are always very small entrepreneurs and low-............⁴ households. Secondly, funds are used for income............⁵, enterprise development or community use. Finally, most............⁶ and conditions formicrocredit loans are............⁷, easy to understand and suited to the local conditions of thecommunity.

Microcredit has proved an effective and popular measure in the ongoing struggle against poverty, enabling those without............⁸ to lending institutions to borrow at bank............⁹ and start small businesses.

 

	a) invented	b) pioneered	c) opened	d) made
	a) adopted	b) taken	c) held	d) changed
	a) differ	b) move	c) adapt	d) rotate
	a) rate	b) fund	c) money	d) income
	a) rise	b) increase	c) generation	d) production
	a) rules	b) contracts	c) terms	d) laws
	'a) flexible	b) positive	c) fixed	d) favourable
	a) opening	b) access	c) way	d) step
	a) premiums	b) duties	c) fees	d)rates