When a company is growing rapidly,

When a company is growing rapidly, for example when contemplating investment in capital equipment or an acquisition, its current financial resources may be inadequate. Few growing companies are able to finance their expansion plans from cash flow alone. They will therefore need to consider raising finance from other external sources. In addition, managers who are looking to buy-in to a business ("management buy-in" or MBI) or buy-out ("management buy-out" or MBO) a business from its owners, may not have the resources to acquire the company. They will need to raise finance to achieve thir objectives.
There are a number of potential sources of finance to meet the needs of a growing business to finance na MBI or MBO:
- Existing shareholders' and directors' funds.
- Family and friends.
- Business angels.
- Clearing banks ( overdrafts, short or medium-term loans).
- Invoice discounting (a service involving the sale for cash of approved invoices to a financial institution).
- Hire purchase (system of purchase by paying in instalments) and leasing.
- Merchant banks (medium to longer term loans).
- Venture capital (capital invested in a business where the chances of success are uncertain).
A key consideration in choosing the source of new business finance is to strike a balance between equity and debt to ensure the funding structure suits the business.
The main differences between borroed money (debt) and equity are that, with debt, bankers request interest payments and capital repayments, and the borrowed money is usually secured on business assets or the personal assets of shareholders and/or directors. A bank also has the power to place a business into administration or bankruptcy if it defaults on debt interest or repayments or its prospects decline.
In contrast, equity investors take the risk of failure like other shareholders, while they benefit from participation in increasing level of profits and on the eventual sale of their equity stake.
The overall objective in raising finance for a company id to avoid exposing the business to excessively high borrowings, but without unnecessarily diluting the share capital. This will ensure that the financial risk of the company is kept at an optimal level.
Raising finance is dependent on a good business plan which demonstrates that the management is aware of all the risks involved.
TYPES OF FINANCE
- Venture Capital
Venture capital is a general term to describe a range of ordinary and preference shares where the investing institution acquires a share in the business. Venture capital is intended for higher risks such as start-up situations and development capital for more mature investments. there are also certain large industrial companies hich have funds available to invest in growing businesses and this 'corporate venturing" is an additional source of equity finance.
- Grants
Government, local authorities and local development agencies are the major sources of grants. Grants are normally made to facilitate the purchase of assets and either the generation of jobs or the training of employees.
- Invoice Discounting
Finance can be raised against debts due from customers via invoice discounting, thus improving cash flow. Debtors are used as the prime security for the lender and the borrower may obtain up to about 80% of approved debts.
- Hire Purchase and Leasing
Hire purchase agreements and leasing provide finance for the acquisition of specific assests such as cars, equipment and machinery involving a deposit and repayments over, typically, three to ten years.
- Loans
Medium-term loans (up to 7 years) and long-term loans (including commercial mortgages) are provided for specific purposes such as acquiring an asset, business or shares. The loan is normally secured on the asset or assets and the interest rate may be variable or fixed.
- Bank Overdraft
An overdraft is an agreed sum by which a customer can overdraw their current account. It is normally secured on current assets, repayble on demand and used for short term working capital fluctuations. The interest cost is normally variable and linked to the bank's base rate.
- Completeng the finance-raising
Raising finance is often a complex process. Business management needs to assess several alternativs and then negotiate terms which are acceptable to the finance provider. The main negotiating pionts are often as follows:
- Whether equity investors take a seat on the board
- Votes ascribed to equity investors
- Level of warranties and indemnities provided by the directors
- Financier's fees and costs
- Who bears costs of due diligence .

Результаты (русский) 3:

Когда компания быстро растет, например, когда рассматривает возможность инвестиций в производственное оборудование или приобретения, свои финансовые ресурсы могут быть недостаточными. Несколько растущих компаний для финансирования их планов расширения от потока денежных средств. Поэтому им будет необходимо рассмотреть вопрос о мобилизации финансовых ресурсов из других внешних источников. Кроме того,