"Smart Finance Moves: Maximizing Your Investments"

9 Raising finance MARKET LEADER 4 Unit 9 Raising Finance

2 3 4 5 6 Main Menu 1 Starting up Listening: Ways of raising finance Vocabulary: Financial terms Reading: Financing start-up businesses Skills: Negotiating Case study: Vision Film Company

9 Raising finance MARKET LEADER 4 Starting up

1 Discuss the questions • What are the advantages and disadvantages for a private individual of borrowing money from the following: a) a bank? b) a friend or colleague? c) a member of your family? d) a loan shark? e) a credit card company? f) another source? Starting up

1 Possible issues: a) Bank: • Advantages: it’s a business transaction that doesn’t involve friends. • Disadvantages： • high rates of interest which mean it can be expensive; • all sorts of problems if you can’t repay the loan such as your credit rating will be affected and it might be difficult to get loans in future. Starting up

1 b) Friend or colleague: Polonius seems to be criticizing all sorts of borrowing (the quotation in the unit: “Neither a borrower nor a lender be…” ) c) Member of family: Families are often the main source of borrowing for many business start-ups but they might be less willing to lend for other purposes. Starting up

1 d) Loan shark • Advantage: people with no credit history can borrow money • Downside: interest rates are extortionate and they might be harmed if they don’t repay. e) Credit card company • Easy to do • Interest rates are very high and a bank loan would be cheaper Starting up

1 Discussion questions: • Imagine you have just won $300,000. You want to use it to secure your long-term financial future. How would you invest the money? • Do you think it is good business practice for a company to pay its bill late? • ‘People with overdrafts are bad money managers.’ Do you agree? Starting up

1 • What do you think the following saying mean? Do you agree with them? a) Time is money. b) Money is the root of all evil. c) A fool and his money are soon parted. d) Money can’t buy you love. e) Love does much; but money does more. Starting up

MARKET LEADER 4 1 Communication Listening Ways of raising finance

2 Listening -A • 9.1 Listen to the first part of an interview with Rosemary Leith, co-founder of the Internet business consultancy Flametree.com. • What are the two commonest ways for businesses to raise finance? Listening: Ways of raising finance

2 Listening 9.1 Listening: Ways of raising finance

2 Keys to 9.1 Equity Listening: Ways of raising finance

2 Listening 9.2 • Now listen to the rest of the interview and answer these questions. • Are start-up companies more likely to raise money through debt or equity? What about growth businesses? • Why can debt be more expensive than equity? • Which method of raising finance did Rosemary’s company choose? • What four factors does the process of raising money depend on? • What are the advantages of the way Rosemary’s company raised money? Listening: Ways of raising finance

2 Question 1 • Are start-up companies more likely to raise money through debt or equity? What about growth businesses? • Keys:It’s unlikely that start-up companies will be able to get loans and finance themselves through debt. More established growth companies can finance themselves through debt. Listening: Ways of raising finance

2 Question 2 • Why can debt be more expensive than equity? • Keys:Debt is expensive because there are regular repayments to be made lenders. (It isn’t specifically mentioned, but shareholders will be willing in some cases to wait quite a long time before they get any payback on their investment in the form of dividends.) Listening: Ways of raising finance

2 Question 3 • Which method of raising finance did Rosemary’s company choose? • Keys:Equity Listening: Ways of raising finance

2 Question 4 • What four factors does the process of raising money depend on? • Keys:The state of the economy, the business concept, having the right people, having contacts with investors. Listening: Ways of raising finance

2 Question 5 • What are the advantages of the way Rosemary’s company raised money? • Keys: The managers kept control of the company because they were the controlling shareholders: Rosemary Leith and her business partner own the majority of the shares in the company. Listening: Ways of raising finance

MARKET LEADER 4 1 Communication Vocabulary Financial terms

3 A. Word Match • a) money to carry on production and keep trading • b) money a company has raised from investors who bought shares • c) money invested in a project with a high chance of failure • d) money a company borrows to start up a new business • e) the perceived value of people and their skills • 1.human capital • 2.risk capital • 3.share capital • 4.venture capital • 5.working capital Vocabulary: Financial terms

3 B. Match the following expressions with the correct definitions. • I took out a……………. to extend the factory. a) credit b) debt c) loan • He offered his home as security or…………… when he borrowed from the bank. a) collateral b) deposit c) warranty • The………………….rate on the loan was 15%. a) charge b) fee c) interest √ √ √ Vocabulary: Financial terms

3 • We have a(n)…………………….of $1 million to finance our three-month advertising campaign. a) budget b) cost c) expense • They have to pay the loan back over three years. The first…………is due in August. a) amount b) installment c) part • Our state-of-the-art machinery is our major……………………. a) asset b) possession c) property √ √ √ Vocabulary: Financial terms

3 √ • We want to find a partner who will take a ……………………..in our business. a) risk b) share c) stake • Thanks to a government…………………the firm was able to move to a new location. a) contribution b) subsidy c) support • Money owed by a company to its suppliers forms part of its……………. a) damages b) liabilities c) losses • When the bank grants a business an………………..facility, their current account can go into the red. a) overdraft b) overhead c) overpayment √ √ √ Vocabulary: Financial terms

9 Raising finance MARKET LEADER 4 Reading Financing start-up businesses

Language points of the text

poised (L.5) adj. completely ready to do sth. or for sth. to happen, when it is likely to happen soon poised to do sth. Spain was poised to become the dominant power in Europe. poised on the brink/edge of sth. The economy is poised on the edge of collapse.

catalyst (L.6) noun, sth. or someone that causes an important change or event to happen catalyst for They hope his election will act as a catalyst for reform.

conducive (L.20) adj. be conducive to sth.,if a situation is conducive to sth. such as work, rest etc, it provides conditions that make it easy for you to work etc: an environment conducive to learning. Other things being equal, visual improvements are conducive to survival and reproduction.

sanctuary (L.49) noun. a place where people who are in danger from other people can go to be safe. • Fleeing refugees found sanctuary in Geneva. • His church became a sanctuary for thousands of people who fled the civil war.

scramble (L.55) verb. If you scramble over rocks or up a hill, you move quickly over them or up it using your hands to help you. • Tourists were scrambling over the rocks looking for the perfect camera angle. • She scrambled down the tree as quickly as she could.

entrepreneurship (L.2) Article B • noun. the state of being an entrepreneur, or the activities associated with being an entrepreneur. • Entrepreneurship is often a difficult undertaking, as a vast majority of new businesses fail.

averse (L.30) • adj. formal, unwilling to do sth. or not liking sth. • be averse to (doing) sth. • Jim is averse to using chemicals in the garden. • Some banks are risk averse (=do not like taking a risk).

equity (L.67) • noun. shares in a company from which the owner of the shares receives some of the company's profits rather than a fixed regular payment • The rankings were based on return on equity.

stake (L.68) • noun. if you have a stake in a business, you have invested money in it • hold/have a stake in sth. • He holds a 51% stake in the firm.

4 Look at the exercises Reading: Financing start-up businesses

4 Reading -A • Scan the two articles on page 79 and match them to the following statements. • Emerging entrepreneurs will be essential to the future prosperity of the country. • With banks reluctant to lend, many entrepreneurs have looked to family and friends for help providing start-up capital. Article A: statement 1 Article B: statement 2 Reading: Financing start-up businesses

4 Reading -B • Work in pairs. Student A reads article A; Student B reads article B. Do not read your partner’s article yet. Reading: Financing start-up businesses

4 Reading -C • True or False 1. In both countries entrepreneurship has always been an important part of the culture. F ‘Only now is Japan starting to develop a business environment conducive to entrepreneurial growth’. But in Italy, ‘entrepreneurship seems part of the culture’. Reading: Financing start-up businesses

4 Reading -C • True or False 2. In both countries businesses usually start with finance from banks. F In Japan, capital was available from banks, but new companies found it hard to obtain: ‘The head of a big bank … doesn’t know what it’s like trying to raise ¥500,000’. In Italy, ‘banks have… become risk-averse and reluctant to lend’. Reading: Financing start-up businesses

4 Reading -C • True or False 3. Risk money is available in Japan, but not readily available in Italy. T ‘… the country has attracted [risk capital]’. Whereas in Italy, in one study, out of ‘scores of entrepreneurs’ only two had obtained capital. Reading: Financing start-up businesses

4 Reading -C • True or False 4. Families often provide finance for start-up companies in Italy and Japan. F Families are not mentioned in the article about Japan. It’s true of Italy, where people ‘borrow from parents, other family members and friends’. Reading: Financing start-up businesses

4 Reading -C • True or False 5. Both governments want to promote schemes to encourage new businesses. T ‘Japanese authorities have been [making] the country’s legal and structural framework more venture business-friendly.’ (We can assume this includes specific schemes.) In Italy, there ‘is an outstandingly successful government-funded scheme to encourage young entrepreneurs’. Reading: Financing start-up businesses

4 Reading -D • Match the definitions below to words in the articles. Then use the words in sentences of your own. Reading: Financing start-up businesses

4 Article A • something that causes an important change or event to happen (para 1) • to encourage something to happen over a period of time (para 3) • favouring people who want to start up new businesses (para 3) • a company paid to do part of the work of another company (para 2) catalyst foster entrepreneur-friendly subcontractor Reading: Financing start-up businesses

4 Article B • a company’s business expressed as sales of goods and services over a period of time. (para 3) • shares that one company owns in another company (para 5) • a loan which is not guaranteed by the borrower’s assets (para 5) • a bank that deals with businesses rather than the public (para 2) turnover equity stakes unsecured loan merchant bank Reading: Financing start-up businesses

4 Reading -E • Study the order of the underlined words in the sentence from article A. Then rewrite the sentences below beginning with the words in brackets. Discuss how the meaning of the sentence is affected in each case. Reading: Financing start-up businesses

4 Reading -E • E.g. Only now is Japan starting to develop a business environment conducive to entrepreneurial growth. • (Seldom…) We rarely have goods returned to us because they are faulty. • Seldom are goods returned to us because they are faulty. Reading: Financing start-up businesses

4 Reading -E • (At no time…) He never apologized for his mistake. • At no time did he apologize for his mistake. Reading: Financing start-up businesses

4 Reading -E • (Under no circumstances…) The budget must not be exceeded. • Under no circumstances must the budget be exceeded. Reading: Financing start-up businesses

"Smart Finance Moves: Maximizing Your Investments"