DIFFERENT FINANCING OPTIONSDIFFERENT FINANCING OPTIONS

QUESTIONS TO ASK WHEN QUESTIONS TO ASK WHEN LOOKING FOR FINANCINGLOOKING FOR FINANCING

WHAT AMOUNT DO I NEED?WHAT AMOUNT DO I NEED? HOW DO I RAISE THE FUND? IS IT THROUGH HOW DO I RAISE THE FUND? IS IT THROUGH

EQUITY OR DEBT?EQUITY OR DEBT? WHAT INFORMATION DO I NEED TO WHAT INFORMATION DO I NEED TO

PROVIDE THE LENDER/INVESTORPROVIDE THE LENDER/INVESTOR WHAT ARE THE REPAYMENT TERMS? DO I WHAT ARE THE REPAYMENT TERMS? DO I

HAVE TO PAY INTEREST? IF SO, WILL IT HAVE TO PAY INTEREST? IF SO, WILL IT VARY OVER TIME OR FIXED?VARY OVER TIME OR FIXED?

HOW LONG WILL IT TAKE TO ACQUIRE THE HOW LONG WILL IT TAKE TO ACQUIRE THE FUNDS?FUNDS?

QUESTIONS LENDERS WILL ASK QUESTIONS LENDERS WILL ASK BEFORE TAKING DECISIONBEFORE TAKING DECISION

INFORMATION TO DERTERMINE HOW INFORMATION TO DERTERMINE HOW THE BUSINESS IS MANAGEDTHE BUSINESS IS MANAGED

THE SIZE OF THE LOAN AS THE SIZE OF THE LOAN AS COMPARED TO HOW MUCH YOU HAVECOMPARED TO HOW MUCH YOU HAVE

COMPANY’S ABILITY TO LIQUIDATE COMPANY’S ABILITY TO LIQUIDATE ITS CURRENT ASSETSITS CURRENT ASSETS

FINANCING METHODSFINANCING METHODS

SHORT TERM FINANCINGSHORT TERM FINANCINGLONG TERM FINANCINGLONG TERM FINANCING

Long Term Sources of FinanceLong Term Sources of Finance

Domestic Sources of FinanceDomestic Sources of Finance

Foreign CapitalForeign Capital

Domestic Sources of FinanceDomestic Sources of Finance

Debt Debt Equity – Share CapitalEquity – Share Capital Retained earningsRetained earnings

Share CapitalShare Capital : :

Equity Share CapitalEquity Share Capital

Preference Share Capital Preference Share Capital

Right IssueRight Issue

WarrantsWarrants

Debt FinancingDebt FinancingDebt securities: Debt securities:

- Secured & unsecured debentures- Secured & unsecured debentures

- Convertible & non convertible debentures- Convertible & non convertible debentures

- Zero interest fully convertible debentures- Zero interest fully convertible debentures

- Secured premium notes- Secured premium notes

- Deep discount bonds- Deep discount bondsLoan from financial InstitutionsLoan from financial InstitutionsPublic DepositsPublic DepositsTerm loans from banksTerm loans from banks

DebenturesDebentures

Kinds Of DebenturesKinds Of Debentures

Bearer DebenturesBearer Debentures Registered DebenturesRegistered Debentures Perpetual Or Irredeemable DebenturesPerpetual Or Irredeemable Debentures Redeemable DebenturesRedeemable Debentures Debentures issued as Collateral Security for a LoanDebentures issued as Collateral Security for a Loan Naked DebenturesNaked Debentures Secured DebenturesSecured Debentures

Advantages Advantages DisadvantagesDisadvantages Debenture vs. Share CapitalDebenture vs. Share Capital Methods of Redemption of DebenturesMethods of Redemption of Debentures

- Redemption of Debentures on a Fixed Date- Redemption of Debentures on a Fixed Date

- Redemption of Debentures by periodical - Redemption of Debentures by periodical drawingsdrawings

Sinking FundSinking Fund Debenture Redemption ReserveDebenture Redemption Reserve Convertible DebenturesConvertible Debentures

- Valuation of Convertibles- Valuation of Convertibles

- Institutional Conversion of Debentures / Loan - Institutional Conversion of Debentures / Loan into equityinto equity

New Debt InstrumentsNew Debt Instruments

Zero Interest BondZero Interest Bond Equity warrants with NCDsEquity warrants with NCDs Secured premium NotesSecured premium Notes Deep discount BondsDeep discount Bonds Zero Coupon Convertible NotesZero Coupon Convertible Notes Debt for Equity swapDebt for Equity swap Multi-option Secured Redeemable convertible Multi-option Secured Redeemable convertible

DebenturesDebentures Callable BondCallable Bond Option Tender BondsOption Tender Bonds Guaranteed DebenturesGuaranteed Debentures

continuedcontinued

Subordinated DebenturesSubordinated Debentures Floating Rate BondsFloating Rate Bonds Junk BondsJunk Bonds Indexed BondsIndexed Bonds Stepped-up DebenturesStepped-up Debentures Inflation – Adjusted BondsInflation – Adjusted Bonds Coupon StrippingCoupon Stripping

Asset SecuritizationAsset Securitization

TERM LOANSTERM LOANS

Use to finance your permanent working capital, Use to finance your permanent working capital, purchase of new equipment, construction of purchase of new equipment, construction of buildings, business expansion, refinance buildings, business expansion, refinance existing debt and business acquisitions. existing debt and business acquisitions.

Term loans are repaid from the long-term Term loans are repaid from the long-term earnings of the business. earnings of the business.

Therefore, projected profitability and cash flow Therefore, projected profitability and cash flow from operations are two key factors lenders from operations are two key factors lenders consider when making term loans.consider when making term loans.

Generally, interest rates on long- term loans are Generally, interest rates on long- term loans are higher than for short-term loans. higher than for short-term loans.