Financial Consultancy and Project Funding

The current highly dynamic business environment, rapidly changing customer needs and strong competition almost all markets are forcing today’s entrepreneurs need to develop their businesses and adapt to changing conditions. No such changes may be the cause of many problems and as a result may decide to losing competitive advantage and ultimately losing the battle against companies operating in the same segment. In order to maintain a high growth rate and be able to constantly change and improve the company in the dynamically evolving markets, entrepreneurs are faced with the need to increase and expand production as well as expanding markets, which requires the most capital-intensive investments. Some of these investments significantly exceed the financial capacity of enterprises. As practice shows many promising and potentially profitable projects and ideas for new innovative products and services which not only been realized due to lack of sufficient funds in the enterprise. While companies with an established position with considerable fortune capital necessary for investment can be mobilized through the sale of assets of many new starting, innovative businesses and creative entrepreneurs must often rely on a very good idea in the absence of sufficient funds and must rely on solely funding exterior. Inability to obtain financing from outside is often the reason for abandonment of interesting projects or provides for their failure.

Problems with obtaining financing for the development of existing and young companies are not born with a general lack of access to capital but often out of ignorance owners and managers of possible sources of its acquisition. Most of the entrepreneurs, especially those functioning in the market for many years, the only source of external capital loans recognizes bank loans. In practice, the rapid growth of financial markets and the free movement of capital, particularly within the European Union, give the entrepreneur good ideas and perspectives to easily find an alternative to bank loans financing sources. In general, an external source of financing the company can be divided into equity, debt  and hybrid financing.

Equity funding consisting in  delivery of the necessary capital company by an investor in return for the acquisition of shares in the company. In the case of seed and venture capital and private equity investors are funds providing capital for several years (usually around 5) exits carrying above-average returns. Each of these sources is designed for companies in different stages of development and different risk – bearing investments. Seed capital is designed for a completely new ventures (start – up) or businesses at very early stage of development. Due to the lack of the history of corporate investments of this type they are characterized by high risk and therefore investors expect from these very high rates of return. On the type of seed capital, in particular, can count entrepreneurs operating in highly innovative industries such as IT, biotechnology and high-tech characterized by a particularly high potential for development. The next stage of development of the company can be financed while the Venture Capital funds which also expect high rates of return in exchange for making venture investments. In the case of capital – seed type are preferred innovative industries with high potential and the company characterized by innovation in matters of product and business model. Mature companies with an established position in the market which seeking capital for further development are interested in private equity funds with their substantially greater financial resources and able to support even the largest projects. In order to obtain investor Private Equity companies have characterized the competitive advantages and the large reserves optimization or development opportunities.

While the financial investors of Seed, Venture and Private Equity are expected to only return on invested capital within a specified time, strategic investors seeking investment opportunities in made the restriction of competition and enter new markets as well as the synergies resulting from the cost reduction, achieving economies of scale and centralization of some function. Such investments are risky and associated with different organizational cultures and potential difficulties in integrating the combined businesses, which of this type of investment should be carefully analyzed.

Recent forms of capital are private and public issue of shares which consist of the inclusion of a new partner or partners to the current ownership structure. Private Issue is addressed to a limited group of investors and frequently provides an introduction to public issue involving the company’s debut on the Warsaw Stock Exchange. About initial public offering (IPO) of the company decide mainly mature companies having good financial results and strong market position. Issuance of this type allows to gain considerable capital, however requires the completion of a series of formalities.

Another group of sources of capital for the company’s debt financing in which investors do not expect the share capital of the company and only rely on a certain return on investment in the form of periodical payments. There are two main varieties of debt financing, namely credit and bonds which differ in their degree of risk, cost and a way to raise funds. Currently, the bank loan is the most used form of debt financing, mainly due to the relative ease in obtaining it and the common knowledge about it. However, debt financing in the form of bonds may be competition for loans mainly due to the ability to reach a larger group of customers and the freedom of companies issuing bonds in the selection of parameters such as maturity, coupon payment frequency and interest rate. In the case of a bank loan all its parameters are imposed from above by the bank and depend on the creditworthiness of the company. What is more frequently a bank loan granted by a bank or in specific cases where it is required – the commitment of substantial capital, a consortium of banks and each application which is subjected to a detailed assessment and approval, which may result in difficulties in obtaining it. A different situation is in the case of bonds because the issuer may make an offer to purchase an unlimited number of investors, which at the same time give the possibility of arbitrary shape their parameters and significantly increases the likelihood of acquiring capital. Nevertheless, the issue of bonds with higher than in the case of a bank loan costs arising on the one hand with having to pay higher interest rates (bonds carry a greater risk than credit) and on the other hand costs and formal as well as distribution. Higher risk of bonds relative to bank loans due to the fact that in the event of bankruptcy of obligations repaid to lender are prior than to bondholders. In this aspect, you must identify a specific form of debt which is senior debt and is seigniorial forms of a debt (is repaid first) and therefore has a lower cost and high – interest bonds issued by the company in a bad financial situation. The low popularity of bonds may also affect the fact that the placing of their issue forces the need for a kind of  ”advertising campaign” among potential investors, which requires skills and access to a database of entities interested in acquiring them, therefore issue and offering of bonds is most often conducted by an experienced counselor.

The final form of capital linking debt financing and equity is a mezzanine or otherwise hybrid financing twhich consists of debt extended by the so-called equity kickers which are usually options on shares of the company. Taking into account the element of equity in this type of funding makes it subject to a lower risk for the investor and therefore cheaper for the company. Mezzanine solutions are mainly used as bridge financing in time for obtaining the proper financing and as an alternative for debt and cheaper source of capital for companies with a short story or companies undergoing restructuring.

The above examples of different funding sources prove that no development of interesting projects or companies with high potential can not be slowed down or even prevented lack of access to capital. Nevertheless, the process of obtaining financing needs proper preparation and conduct of the first term due to the same financial needs as well as the identification and analysis of possible sources of capital. In this process, an important support is to engage specialized consultants which is undoubtedly the Executive Networks. Years of experience in strategic and financial consulting  held by Executive Networks ensures an adequate estimate of capital needs taking into account the internal sources of capital in a company such as redundant assets as well as enabling the selection of appropriate to the needs and capabilities of the company obtaining external funding sources. Moreover, a large number of completed projects and a broad network of clients and partners allows for optimization of the negotiating process and ensure you get the best financing conditions.