Session 5:

Financing the New International business venture

•Activity 1: Please discuss the listed potential sources of finance for a new
International Business Venture in general by outlining eligibility, advantages
and disadvantages features.
I. Equity options:
•Seed finance,
•Angel finance,
•Equity crowdfunding,
•Venture capital
•Corporate venture capital
•Private equity IPO/Initial Public Offering
2. Debt Options:
•Start-up loan
•Overdraft
•Bank loan/Bond
•Peer-to-peer lending
•Asset-based finance *
•Leasing & hire purchase
•Export or trade finance
•Growth finance
Session 5: Financing the New International business
venture
• Activity 2: Why do an entrepreneur needs a business plan and in
particular ‘financial projections’ including (cash-flow forecasts)’ as
the merits/basis of financial needs from traditional sources of finance
and others?

• A business that fails to plan, is planning to fail!

 Session 5: Financing the New International business
venture

Activity 3: You have 15 minutes in your groups to identify/exchange the

different sources of finance, financial initiatives (in different countries) available
for new international business ventures in the UK and in ‘students’ country of
origin’ or where your business is assumed to be based (headquartered).

• Could you also explain its types and key features, criteria, steps and process
for funding. You can support your answers with examples and evidence.
 Session 5: Financing the New International business venture
Activity 4: Please identify and justify which sources of funding is suitable and at
what stage (phase) of your new International businesses venture.
• Provide examples
• Identify key features
• Any legal requirements in the UK / country specific contexts
• Advantages
• Disadvantages
Session 5: Financing the New International
business venture
• Activity 5: Please identify and discuss any business support
provisions and institutions for SMEs in the UK and internationally
including in students’ countries of origin.
Appendix
Debt financing involves the borrowing of money whereas equity financing involves
selling a portion of equity in the company. The main advantage of equity financing is that
there is no obligation to repay the money acquired through it.
Comparison of Bank Overdrafts and Bank Loans

• The key advantages of overdrafts and loans in certain business situations:

• Advantages of an overdraft over a loan
• Business only pays interest when overdrawn
• Bank has flexibility to review and adjust the level of the overdraft facility, perhaps on
a short-term basis
• Overdraft can be effectively be used as a medium-term loan – the facility is simply
renewed each time the bank comes to review it
• Being part of short-term debt, the overdraft balance is not normally included in
calculations of the business' financial gearing
• Advantages of a loan over an overdraft
• Business and bank know precisely what the repayments of the loan will be and how
much interest is payable and when. This makes cash flow planning more predictable
• The loan is committed – the business does not have to worry about the loan being
withdrawn whilst it complies with the terms of the loan
Leasing or hire purchase

• What's the difference between leasing, hiring and buying? If you get

a lease, you don't own the car. ... A hire purchase agreement allows
you to own the car at the end of the contract, but the finance
company retains ownership during the contract. The lease rentals
cover the cost of using an asset. Normally, it is derived with the cost
of an asset over the asset life. In the case of hire purchase, instalment
is inclusive of the principal amount and the interest for the time
period the asset is utilized.
Leasing or hire purchase
• DURATION
• Generally, lease agreements are done for longer duration and for
bigger assets like land, property etc. Hire Purchase agreements are
done mostly for shorter duration and cheaper assets like hiring a car,
machinery etc.
• TAX IMPACT
• In the lease agreement, the total lease rentals are shown as
expenditure by the lessee. In hire purchase, the hirer claims the
depreciation of asset as an expense.
Company Funding Lifecycle
Bond vs Loan
Trade vs Export Finance
• Trade finance is a term universally used for financing both imports and
exports. In many mediums this will encapsulate invoice finance, purchase
order finance, off balance sheet lending, letters of credit and similar funding
instruments.
• Trade finance is usually spoken about in reference to cross border trade.
However, it may also be domestic trade. It is commented on by many as being
seen as a financing mechanism which is not well known in the market, but by
having purchase orders and suppliers – there is a way of financing a trade
through the use of a lender’s funds. This allows a business to have enormous
growth based on facilities to complete their trade cycle. For those trading
entities that require an element of holding goods (not sent directly to end
consumer); a funder may be able to finance stock within warehouse.
.. Trade vs Export Finance
• Export finance is perceived as a part of trade finance, where goods
are financed in order to export. An example of a type of export
finance is a cash advance used for manufacturing goods made for
export; which could be a deposit from the buyer. It may also be a
letter of credit that is required, when goods are transported cross
border to new buyers. In order to make sure they are paid for (and
conversely, released); this is usually done by way of checks or 
Letters of Credit in place. By using these bank instruments it allows
trust to build up between parties and facilitate trade.