Financing varies by stage of business life
However, expenditure in this phase are higher. This can lead to an erosion of the seed. Then get the customer base of the company firmer shape. The company is investing more in stocks and debtors, so the risks for the financiers slightly reduced. Yet in the company are generally little collateral.
The bank will in such a situation, try to limit its risks which may lead to curtailment of the credit space while the company is currently just need additional funding. In many cases the informal investerteerder the business angel are saving. The entrepreneurial mindset of the investor in these phases of fluctuating cash flows an important advantage. If the company has to deal with financial setbacks, additional investment.
Debt
Providers of risk-capital in this initial phase will be cautious in providing funding as an equity still not at the desired degree. A loan can stimulate seed capital increase. This will strengthen the own capital, according to banking standards which funding comes into the picture. If the operator is able to provide sufficient security risk debt in the form of a loan guarantee for example the solution.
Equity
Especially for start-ups that take a number of years will be profitable, may be preferred equity. This means that the company in a company must be inserted. In that case, in a tight liquidity situation of the dividend payment be delayed. Only give preference shares or a fixed annual rate of dividend in priority to ordinary shares. Cumulative preference shares also give priority right to dividends in arrears of previous years have not been paid.
Consolidation and encourages growth
In the consolidation phase the company in a better market position and stable waters. As a result of profit increases the company to strengthen its capital through earnings retention. The solvency and borrowing capacity to improve this. The subsequent growth will be initiated primarily by rising sales increase investments made long-term debt which is needed. The company will include investing in product development and market enlargement.
Despite the improved market may at this stage, banks are reluctant to provide financing because it is a financing with a high risk profile. Venture capitalists see profit opportunities in this phase and will very likely be available to equity.
Leverage
The ownership and control structure in the company will have an important role in the choice of pulling power. By using leverage, earnings value of the shares or dividends primarily benefit the shareholder. So if earnings expectations are good, the shareholder will have a preference for debt financing.
Interference in business policy
The holding company will influence (through equity or voting on the appointment of a commissioner) to carry on the business policy of the operator where appropriate to sturen.De entrepreneur will need to ask whether he needs the active support or control of a "third" in the company's performance. Where the operator is small entrepreneurial experience or knowledge of the industry is available, the informal investor a significant added value.
The entrepreneur who even no interference in the enterprise wishes, will be better served with a subordinated loan.
In this connection, it may also consider a convertible bond. For the entrepreneur has the advantage that he has given more discretion to control the loan is not connected to the investor. And if the value of the shares rises above the conversion price, the investor may convert its loan into shares. This he took advantage of an appreciation of the company. Additionally, this for the investor, if a majority interest arises through conversion, the possibility of the entrepreneur if necessary direct.
Growth and maturity
In the phase of strong growth will mainly take place to increase investments to increase production, and all available resources will be used for growth. The financial flexibility of the company will reduce this. By deduction, the earnings of the company's equity will be enhanced and the company better able to attract bank loans.
In the stage of maturity shifts the focus of investment is replacement investment. The cash flow of the firm is positively affecting the financial flexibility improves. By profit retention, the solvency of the company further improve. For both phases is that in principle all capital providers are active.
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