Master Class #45-How Your Accounting Treatment Will Affect your Business Loan?

These are some funds that you can go for, for a start up company. Venture capital, is a kind of M-Tech capital. Angel funding is a new thing. Actually, both venture capital and angel funding are very similar. For debt financing, it is like a bank while for grants, it is a kind of money that you don’t have to pay it back. The objective of venture capital and angel funding is capital gains. For debt financing, it is lending money to people like a bank and expect to get paid back with interest and principal. Venture capital and angel funding is people invest in your company and expect to get in return and dividend. So, holding period for venture capital is mid-to-long term which is about three to eight years and for angel funding, which is the short-term of venture is about two to five years. The holding period of debt financing is short-to-mid term. Criteria that they need is potential for investment in terms of dividend. For debt financing, it is we expect to get paid back with interest and principal. It is absolutely like a bank, when you have a lot of borrowing. Impact on the balance sheet is a technical term in accounting. Reduce leverage means the ratio looks good in terms of the balance sheet. For debt financing, it means the ratio doesn’t look good. It means that there is a lot of borrowing. Venture capital has seat on board of directors and quarterly operational reports during monitoring. Angel funding is similar too, they need day-to-day operations on decision making. In contrast, debt financing doesn’t have anything in monitoring because they have the full control. The added values of venture capital and angel funding are they assist and give you ideas to get you through the troubles. Exit mechanism of venture capital is IPO, they want your company to be listed or even buy back. Their objective is getting merger to take over the company. IPO, trade sales and buy-back are the key criteria that they want to invest in the company. These criteria are to make people to invest in a startup company. Debt financing is nothing much compared to the other two as it is principally repayment only. Click HERE to View Entire Webinar Replay and Get All Notes. If you enjoyed this article, subscribe to our email list to get FREE email updates on free webinars or tips

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