Effectively raising capital will give you the edge. Sufficient capital will help to ensure your R & D, marketing, and hiring potential is superior to your competitions.

// overview

1	What are the sources of funds?
2	Decide how much you need and for how long
3	How will different finance options affect profitability or cash flow?
4	What documents will you need to support your request for financing?
5	Preparing a business plan and cash flow projection

What are the sources of funds? Capital can be acquired from a multitude of sources that include: Family & relatives - if they are willing to invest in your venture Banks - you most often have to put down some collateral Government Grants & Loans - pay attention to the eligibility criteria Angels, Venture capitalists & individual investors - refer to INVESTORS Malaysian VCs & Grants

Decide How Much You Need and For How Long If your financing needs are greater than your asset base or profitability, you may need to consider equity finance (financing the value of the shares of your company) instead of term lending, especially if you need finance over a long period. However, these alternatives are not mutually exclusive and you may end up with financing from a combination of sources. Ask your advisers to help you decide what types of finance are most suitable for your business. You must work out how much you need to borrow. That's why preparing a cash flow projection is important. For example, if you spread the payments for your investment over a period of time by taking out a bank loan, a cash flow projection will help you decide how big a capital injection is needed to cover any anticipated cash shortfall. Forecasting is not an exact science so you should aim to raise finance slightly in excess of your projected needs to allow for a margin of error. For more on planning your cash flow visit: www.empowermentzone.com www.cashflow-solutions.com  www.cashflowindustry.com/

How will different finance options affect profitability or cash flow? Equity Financing Loan Financing Advantages Disadvantages Advantages Disadvantages Can provide a large injection of capital No interest payments No obligation to repay capital Capital is usually only available in very large amounts It means 'selling' a part of your business Venture capitalists expect high returns on their investments (at least 25% pa) Investors may require you to buy them out at a future point Amount borrowed can vary according to your needs As long as it is repaid it will not affect your ownership of the company It creates a debt  obligation Interest will be charge - affecting profitability Collateral is usually required & banks will value your assets conservatively If you borrow from friends or relatives it can sour relations if the business fails Notes on equity financing: With equity financing, there are no interest payments so there is no impact on your profitability or cash flow. However, your investors may require distribution of profits in the form of dividend payments after a certain period of time. They may also have an exit strategy that requires you to buy them out at a future point in time. Both scenarios can affect your cash flow significantly. Equity providers will become part owners in your company and will therefore be part of the decision making process. They may also insist on legal agreements that give them extensive powers such as the right to place restrictions on the business if performance does not match projections. There may also be safeguards built into an equity finance deal to reduce the chances of failure and give the investor the right to intervene in your business if things go wrong. Notes on debt financing: With loan or asset based financing, the interest payments you make will affect both your profitability and cash flow. However, you may be able to structure the loan so that interest payments are deferred until your revenue can support the repayments. Capital providers will want to protect their investment. Banks may require security in the form of a fixed charge against your personal or company assets that restricts your ability to dispose of those assets. They may also impose clauses that limit the scope of some of your actions. With loan financing, you will need to meet interest payments and repayments of the principal. If your business doesn't meet these obligations, there is a risk that the bank may foreclose on you. With equity financing the capital providers share the risk and rewards but they may remove or restrict you if the business does not perform adequately. The cost of financing depends on how much risk the lender associates with your business. The interest you pay compensates the lender for risks taken in lending. With equity financing, funding is unsecured which means a high level of risk for the equity investor. This means your capital provider must believe you have a good chance of earning a high return, usually in the form of an increase in the company's valuation.