Financial Requirements

The steps which have been followed in the preceding chapters will have finally led to the provision of sufficient data to enable the financing requirements of the new venture to be defined. The details of financing sources will vary throughout the EU and from time to time. It is thus essential that expert advice is sought on what options are open to a particular business venture and what their relative costs will be before a formal application is submitted.

The main alternatives available will be equity participation by a venture capital company, long term and short term loans, bank overdrafts, mortgages and debentures.

In deciding on the financing package it will be necessary to specify the need for working capital and the need for capital for the purchase of plant and equipment. The timing of the financing must be specified and whether this will be required in phases or in a single lump. The funding by the proprietors must be specified since it will normally be a pre-condition that the backers commit a satisfactory level of their own resources before the financiers are willing to advance any money. The question of the availability of assets as security for loans must be considered.

CHECK LIST
- Based on your financial projections state how much cash you require to set up the business and state when repayment will be.
- Based on the cashflow forecast explain when you will need key amounts of resources.
- How much money will come from you or the parent company?
- Where do you expect to raise all other funds? Overdraft? Bank loan? Venture Capital? Share issue? Debentures?
- If you are issuing shares how will you value the business?
- What is on offer to an outside investor?
- What exit route is available to an investor?
- What security, if any, is available on a loan?
- How could the business fail wand what is the level of risk?
- How do you intend to manage or minimise these risks and their consequences?