Steps to Growth Capital New Tech Case Story

New Tech Case Story — Step 2

The Challenge: Where Will the Money Come From?

What They Need To Raise

New Tech now has to consider possible sources of financing. Stuart Chip, New Tech's owner, and Elizabeth Smart, his in-house accountant, have a good handle on how much financing they need — $1,575,000.

Equipment to produce new line (fixed assets)	$ 1,100,000
One-time marketing costs (selling expense)	$   225,000
Ongoing operations (working capital)	$   200,000
Financial cushion	$     50,000
Total financial needs	$ 1,575,000

They feel they've got a strong case to present to investors, with a comprehensive set of financial forecasts and well-documented assumptions.

Where Will the Money Come From?

Their challenge is to determine how much of the $1,575,000 will be financed by:

• the company's internal sources (i.e. cash flow from operations, supplier credit, etc.);
  
• external conventional financing sources (i.e. bank operating line or term debt), and;
  
• risk capital or non-conventional sources (i.e. subordinated debt or equity).
  

Key Tasks

In order to answer these questions, they've got to:

• meet with their bank to determine how much funding they may provide.
  
• examine the company's own operations for possible "internal" sources of funding.
  
• consult with an investment advisor and legal counsel on non-conventional, external funding sources.
  
• consider how much they want to fund with debt (borrowing money) and how much with equity (sale of shares)?

Read how New Tech examined conventional sources of funding.

Read about New Tech's considerations of risk capital financing options.

<< Previous | Next >>