SERVICES

Financing

Managers of venture capital funds, business angels, i.e. private investors, often come across issues of information asymmetry when evaluating the possibilities of investment.

event 22.02.2021.
Foto: Unsplash

Nowadays, companies, craftsmen, entrepreneurs, organizations, or even individuals themselves, are in search of money so they could supplement their needs for liquidity supplement, by combining their own financing resources, or they could find resources for financing their own projects and/or business expansion strategy.

The most common questions are: Where and how to find, secure or adequately use financial assets needed for financing a certain project, or resources intended for securing business development in general?

Regardless of how good a certain project is created, it will not be realised unless a sufficient amount of financial assets needed for its realisation is obtained.

The most frequent financing channels are:

  • banks
  • banks in combination with providers of financial instruments (HAMAG BICRO, EIB, HBOR)
  • HBOR
  • HAMAG BICRO
  • banke in the combination with EU fonds
  • private capital
  • venture risk funds.


The quality of entrepreneurs ultimatively determines the decision concerning investing, especially in-depth knowledge of the industry, i.e. leadership abilities, and the abilities to assess and to deal with risk.
Managers of venture capital funds will deal with financial matters as well, while further emphasizing the entrepreneurial team and the characteristics of the markets.

Is financing from venture capital funds right for your business?
You can expect business angels to accept the approach in making investment decisions that is similar, though not identical, to that of a manager of venture capital funds. There are a few aspects in which you can expect differences.

Managers of venture capital funds will care more about the market risk – a risk which is a consequence of unpredicted competitive conditions that influence the size, growth, and market availability – while business angels will be more concerned about agency risk, i.e. the risk caused by special and possibly divergent interests of entrepreneurs (agents) and investors (directors).

Roadmap of Activities

Analysis

  • The analysis of the existing company’s situation and its desired condition

Strategy

  • Entrepreneur’s business model – we start with creating a financing strategy

Investment Study

  • The making of an investment study and the necessary supporting documentation

Request

  • Submitting the financing request

Defence

  • Defending the financing request
  • Analysis of the Existing Company’s Situation and Analysis of its Desired Condition

Each entrepreneur, in other words, his need for financing, has its prons and cons.When analysing the existing situation, the finances of the last financial year need to be taken into account since they represent a key leverage in the sole process of financing. The banks, together with the rest of investors, firmly hold the indicators of business of the last financial year and of the current business model.

Why the existing business activities need to be analysed when planning a new project?

Will the entrepreneur  have a sufficient cash flow  needed for covering the princial of a newly demanded loan?

What is the sensitivity of an existing business model in relation to certain stress tests? (most commonly 10-15% of decrease in sales and increase in the price of the cost component that has the highest share in the total cost of business activities).

Precisely beacuse of that, entrepreneurs prepare in advance for entering into the most significant investment cycle, and they pay attention to the way of how they will represent their last financial year, how much depreciation needs to be reported, how much profit will be reported, what is the structure of the cost, what is the structure of bilance sheet, how big is capitalisation, etc…..