Financing Your Venture
Written by: Gabrielle Andersen l Insight Team
Welcome to the third instalment of our Commercial Law Series. This month we are taking a closer and more in-depth look at the issue of financing your venture.
Finance is something that all businesses will at some point need to consider, whether at the start-up stage or in order to expand and grow. Canny Group is here to help you and support your business in a variety of ways, including when financing your venture.
We’ve put together this guide to take you through the types of funding, what to consider when entering into finance agreements, and how we can help you navigate the array of options available to your business.
Types of Funding
Financing your business venture can come from a wide range of sources. We have summarised the main options that may be available to you.
1. Self Funding
You may be in the fortunate position of being able to contribute further funds to your business yourself. What many overlook in self-funding is the importance of having documentation in place to formalise this arrangement and protect the individual or entity providing the funding, such as a loan agreement.
2. Debt Funding
Debt funding is another very common form of financing your business through borrowing funds from a commercial lender. Usually, a business will obtain this type of funding via a business loan from a bank. A bank loan usually requires legal advice and a solicitors certificate in order to confirm the business understands its responsibilities and obligations in relation to the loan.
Crowd funding can also operate as either debt or equity funding, where individuals invest in your business in return for future repayment or other rights in your business. Crowd-funding can come in a variety of forms, and depending on what is being sought by the investor may require specific legal advice and a review of any terms and conditions.
All forms of debt funding need to be considered in light of the terms of the loan and your business’s ability to repay and meet its obligations under the loan.
3. Equity Funding
Equity funding involves an investment in your business in return for an equity or ownership stake.
The advantage of equity funding is that there are no debt repayments, and you potentially gain the benefit of having ongoing advice and expertise from your investors. The disadvantage is that in return you have given a portion of your business, revenue and decision-making, to the incoming investor.
Usually in order to obtain equity funding you will need to prepare your business’s financials and a business plan, as well as a loan agreement and potentially also a shareholders agreement if the investor is taking a shareholding in your company. In return for providing an equity stake, it isn’t always just about the amount of the investment. The incoming investor’s industry expertise, experience and network could have the added benefit of providing even more opportunities for your business to grow.
4. Trade Credit Accounts
Trade credit accounts may be a type of financing you are already familiar with, depending on your business. Trade credit is a form of funding where the supplier allows the business to purchase goods with payment provided at a later date and on specific repayment terms. Having a trade credit agreement reviewed prior to entering into it can be a crucial step in protecting your business and also ensuring that you are are able to meet your ongoing obligations to suppliers.
5. Grants + Programs
A rarer form of financing your venture is through the use of business grants and programs. These are often run by the government and are limited to a specific monetary amount, or the number of successful applicants. Grants can be highly sought after depending on the industry as well as the type of grant.
Canny Accounting and Canny Insight are here to help you find grants that you may be eligible for, and to guide you through the application process.
How Canny Group Can Help…
Loan Agreements + Other Documents
Canny Insight is here to review or prepare loan agreements or any other documents relevant to the particular financing arrangement, such as shareholders agreements and terms and conditions.
When reviewing a loan agreement, important matters to consider are the terms surrounding the advancement of the funds itself, and terms regarding the repayment of the loan, including interest, timeframe and amount and frequency of repayment instalments.
Other important matters requiring legal advice are clauses regarding the representations and warranties being made by both parties to the loan agreement, whether any indemnities or personal guarantees are required by the lender, and what occurs in the circumstances of a breach or default by either party.
We examined the specifics of shareholders agreements and other aspects of business structuring in our first commercial law series instalment, check it out here. Obtaining new investment in your business may come with important business structuring decisions, which Canny Insight is here to assist with.
Business Advice
Canny Accounting together with Canny Insight is here to help in providing tailored business advice on any financing arrangements that you may be considering. Canny Advisory can also assist in helping you and your business meet your financial goals.
As a full-service firm, Canny Group has all bases covered in advising and supporting your business.
Canny Insight + Financing Your Venture
Canny Insight’s lawyers are here for you and your business, in helping you meet goals as well as deal with any battles. Our cohesive law practice, alongside our other specialities, provides a boutique legal service offering support to you and your business through every stage of life and the business lifecycle.
We pride ourselves on providing legal services that are accessible, professional, innovative and of the highest quality. We ensure that our legal advice is personalised to each individual client, as no two circumstances are the same.
Get in touch and meet with our specialist accountants, lawyers and financial advisers today to help you finance and grow your business venture.
