2. SCHOOL OF TELCOMMUNICATION DIFFERENT FINANCING OPTIONS Mustapha Ojo

3. SCHOOL OF TELCOMMUNICATION QUESTIONS TO ASK WHEN LOOKING FOR FINANCING WHAT AMOUNT DO I NEED? HOW DO I RAISE THE FUND? IS IT THROUGH EQUITY OR DEBT? WHAT INFORMATION DO I NEED TO PROVIDE THE LENDER/INVESTOR WHAT ARE THE REPAYMENT TERMS? DO I HAVE TO PAY INTEREST? IF SO, WILL IT VARY OVER TIME OR FIXED? HOW LONG WILL IT TAKE TO ACQUIRE THE FUNDS? 10/4/2015Mustapha Olalekan Ojo

4. SCHOOL OF TELCOMMUNICATION QUESTIONS LENDERS WILL ASK BEFORE TAKING DECISION INFORMATION TO DERTERMINE HOW THE BUSINESS IS MANAGED THE SIZE OF THE LOAN AS COMPARED TO HOW MUCH YOU HAVE COMPANY’S ABILITY TO LIQUIDATE ITS CURRENT ASSETS 10/4/2015Mustapha Olalekan Ojo

5. SCHOOL OF TELCOMMUNICATION FINANCING METHODS SHORT TERM FINANCING LONG TERM FINANCING 10/4/2015Mustapha Olalekan Ojo

6. SCHOOL OF TELCOMMUNICATION SHORT TERM LOANS Use for seasonal build-ups of inventory and receivables, as well as to take advantage of supplier discounts or pay lump-sum expenses, such as taxes or insurance. Repayment is usually in a lump sum with interest at maturity Short-term loans are generally made on a secured (or collateralized) basis and are for a term of a year or less. 10/4/2015Mustapha Olalekan Ojo

7. SCHOOL OF TELCOMMUNICATION CREDIT LINES The lender, usually a bank, supplies a business with funds intended to fill temporary shortages in cash that are brought about by timing differences between cash outlays and collections. They are typically used to finance inventories, accounts receivable or for project or contract related work. A track record is often needed before approving a credit line and collateral may be required. Banks will generally require maintenance of certain balances of funds in your commercial bank account. 10/4/2015Mustapha Olalekan Ojo

8. SCHOOL OF TELCOMMUNICATION ASSET - BASED FINANCING A lender accepts as collateral the assets of a company in exchange for a loan. The loan is used as a source of funds for working capital needs. Most asset based loans are financed against accounts receivable since they self-liquidate in a short period of time by themselves 10/4/2015Mustapha Olalekan Ojo

9. SCHOOL OF TELCOMMUNICATION FACTORING Similar to accounts receivable financing with one notable exception. Factors actually buy your receivables and rely on their own credit and collection expertise. Essentially, your customers become their customers. Payments are made directly to the factor by your buyer. Factoring is generally used by firms unable to obtain bank financing. As a result, the cost of factoring is usually higher than other forms of short-term financing. 10/4/2015Mustapha Olalekan Ojo

10. SCHOOL OF TELCOMMUNICATION TERM LOANS Use to finance your permanent working capital, purchase of new equipment, construction of buildings, business expansion, refinance existing debt and business acquisitions. Term loans are repaid from the long-term earnings of the business. Therefore, projected profitability and cash flow from operations are two key factors lenders consider when making term loans. Generally, interest rates on long- term loans are higher than for short-term loans. 10/4/2015Mustapha Olalekan Ojo

11. SCHOOL OF TELCOMMUNICATION LEASING This has become a significant source of intermediate- term financing for small companies in recent years. Any type of fixed asset may be financed through a leasing arrangement. Leasing can be accomplished through a leasing company, commercial bank, the equipment owner or a commercial finance company. Leasing offers a great deal of flexibility as it can be used to finance even small amounts. The leasing company will be particularly interested in the cash flow of your company. 10/4/2015Mustapha Olalekan Ojo

12. SCHOOL OF TELCOMMUNICATION VENTURE CAPITAL One problem many new businesses face is raising sufficient capital. A business in its primary phase will also face a difficult challenge getting a bank loan. Venture capital firms offer capital in exchange for equity in a company. This type of financing is ideal for new businesses since venture capital firms focus mainly on the future prospects of a company when banks use past performance as a primary criteria. 10/4/2015Mustapha Olalekan Ojo

13. SCHOOL OF TELCOMMUNICATION LETTER OF CREDIT A letter of credit is a guarantee from a bank that a specific obligation will be honored by the bank if the borrower fails to pay. Letters of credit can be useful when dealing with new vendors who may not be assured of a company's credit worthiness. The bank would then offer a letter of credit as an assurance to the vendor of payment. Although no funds are paid by the bank. 10/4/2015Mustapha Olalekan Ojo

14. SCHOOL OF TELCOMMUNICATION ANGEL INVESTING Angel investor or Business angel is an affluent individual who provides capital for a start – up business usually in exchange for convertible debt or ownership equity A small but increasing number of angel investors are organizing themselves into angel networks or angel groups to share research and pool their investment capital. 10/4/2015Mustapha Olalekan Ojo

15. SCHOOL OF TELCOMMUNICATION PRIVATE EQUITY FUNDS A fund that invests in companies and/or entire business units with the intention of obtaining a controlling interest (usually by becoming a majority shareholder, sometimes by becoming the largest plurality shareholder) so as to be in the position of restructuring the target company's reserve capital, management, and organizational infrastructure. 10/4/2015Mustapha Olalekan Ojo

16. SCHOOL OF TELCOMMUNICATION INTERACTIVE SESSIONS