5. financial growth

Financial growth

Specification detail

• How to finance a business from both internal sources (profit, asset sales) and external sources (share capital, debt) including stock market flotation

Economies of scale: Here

Venture Capital• Venture capital: how does it work? • Venture capital can help fund a growing business• Small and growing businesses seeking to finance further development may find the

answer in venture capital. Venture capital is the term used for unsecured funding provided by specialist firms in return for a proportion of the company's shares.

• Venture capital investments are seen as relatively high risk because they are unsecured. • The venture capital firm will therefore be looking for a high return (perhaps a compound

return of 25% or more), largely generated by growth in the capital value of the business. • It may well also require representation on the company's board. • Venture capital (VC) is worth considering if your business needs funding for growth, but

can't raise necessary funds through a bank loan, overdraft or by an injection of further capital from the current owner.

• VC money is commonly used in conjunction with a management buy-out (MBO) or buy-in (MBI), where the management team are themselves investing in the business and so demonstrating their commitment to its success.

James Saddon: Herep328

A-Z GCSE Worksheets 42: Financing growth