Page 24 - Brewdog Teaching Notes

FINANCE

Banks do not lend money to start-ups without assets. Equity

financing is a very good way of financing a business if it

cannot afford a loan. Normally a business would collect a
network of investors which increases the credibility of the

business. An investor does not expect immediate returns
from his investment and hence it takes a long-term view of

the business. Investors only realise their investment if the

business is doing well, e.g. through stock market flotation or

a sale to new investors.

Equity or Debt?

Equity finance = selling shares

Debt finance = taking a loan from a bank etc. or

individual

Debt Advantages:

Does not impact cash flow,

Does not dilute ownership higher risk tolerance.

Debt Disadvantages:

Loan payments, personal

Equity Advantages

Less Overhead: When obtaining equity financing, there
is no loan to payback with interest.

The funding is committed to the business and its

intended projects.

allows the capital to be used for business activities.