Financing is an essential element for establishing a new business, launching a new product or service, or expanding an existing business through internal growth or acquisition. It is likely that entrepreneurs and managers will, regardless of the size of their businesses, need to venture into the world of finance several times over the life cycle of the enterprise. In that world they will encounter a wide range of participants, including banks, venture capitalists, investment bankers, government agencies, and business advisors, each of which will provide unique resources and experience. Capital suppliers have become increasingly innovative in devising financing techniques that are tailored to their needs and the goals and objectives of the businesses they serve. However, before managers can begin the onerous process of securing funding, they must develop a careful plan for identifying the financial requirements of the business, the terms upon which the company hopes to secure the necessary funds, and the potential sources for the funding. In addition, in order to be effective in raising and managing their capital, managers must also develop and implement financing strategies supported by a wide variety of specific tools such as budgeting and forecasting and a strong internal finance department. Finally, managers should be familiar with certain generic activities that must be completed in every fund-raising situation including preparation of disclosure documents, presentations to prospective capital providers, due diligence and financing documentation.
Key topics relating to financing activities for businesses include the elements and determinants of the capital structure; the determination and classification of capital requirements; development of a financing strategy; identifying and selecting sources of capital and understanding general capital raising activities. This month’s update to Business Transactions Solution on Westlaw includes an executive summary for clients regarding financing activities for businesses that discusses the sources of the cash element of the capital structure; explains the process of determining the capital requirements for the business; explains the process of developing a financing strategy; describes the various sources of capital for a business and the factors for selecting among them; describes the generic activities that must be completed in every fund-raising situation; and describes the form and contents of the documentation for a financing transaction.