Small and Medium Enterprises Development Agency of Nigeria

Raising Finance

Debt

Equity

Factors to consider
Nature of the business
Stage of business development Control and Ownership

Time
Exist Strategy

Activity
Consider what you are willing to give up, and how far you want the business to develop?
Does your personal motivation align with the sourcing of capital?

Problems when raising Finance

Lack of Collateral
Lack of Accounting Expertise Identifying Sources Interest charges

Approaching an investor
Important factors are:
People Product/Service Idea Magnitude of the Investment

The Valley of Death

Plan More Accurately
Balance the use of Equity and Loan Capital Reduce the Capital Expenditure of the Business Cash Management

Types of Finance
Seed Capital
Venture Capital Development Capital

Sources of Finance
Family and Friends Bank Loans Government Agencies Country Enterprise Boards Retained Earnings Government Tax Relief Venture Capitalists Private Investors Business Innovation Centres European Union Seed Capital Scheme Small Companies Market Microfinance Banks

Activity
How much do you want and where is the best place to get it?

Approaching a venture capitalist

Stage 1: Screening the proposal
Stage 2: In-depth Examination Stage 3: Meeting the Entrepreneur Stage 4: Due Diligence

Accept/Reject
Based on:
Whether the area of investment is of interest The calibre of people involved Whether the accounts make sense and is it a solid investment

VC Investment Portfolio
20% Companies successfully floated on the stock market
40% Companies are merged into a larger companies 20% Living Dead companies that are surviving but havent met the investors expectations

20% Companies fail.

Cash Flow
Life blood of a business
Motivation versus source Autonomy versus success