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9 Raising finance
MARKET LEADER 4
Unit 9
Raising Finance
9 Raising finance
MARKET LEADER 4
Main Menu
1
Starting up
2
Listening: Ways of raising finance
3
Vocabulary: Financial terms
4
Reading: Financing start-up businesses
5
Skills: Negotiating
6
Case study: Vision Film Company
9 Raising finance
MARKET LEADER 4
Starting up
MARKET LEADER 4
9 Raising finance
Discuss the questions
1. What are the advantages and
disadvantages for a private individual of
borrowing money from the following:
a) a bank?
b) a friend or colleague?
c) a member of your family?
d) a loan shark?
e) a credit card company?
f) another source?
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Starting up
MARKET LEADER 4
9 Raising finance
Possible issues:
a) Bank:
• Advantages: it’s a business transaction
that doesn’t involve friends.
• Disadvantages：
• high rates of interest which mean it can
be expensive;
• all sorts of problems if you can’t repay
the loan such as your credit rating will be
affected and it might be difficult to get
loans in future.
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MARKET LEADER 4
9 Raising finance
b) Friend or colleague: Polonius seems to
be criticizing all sorts of borrowing (the
quotation in the unit: “Neither a borrower
nor a lender be…” )
c) Member of family: Families are often the
main source of borrowing for many
business start-ups but they might be less
willing to lend for other purposes.
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MARKET LEADER 4
9 Raising finance
d) Loan shark
• Advantage: people with no credit history
can borrow money
• Downside: interest rates are
extortionate and they might be harmed if
they don’t repay.
e) Credit card company
• Easy to do
• Interest rates are very high and a bank
loan would be cheaper
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9 Raising finance
Discussion questions:
2. Imagine you have just won $300,000.
You want to use it to secure your longterm financial future. How would you
invest the money?
3. Do you think it is good business practice
for a company to pay its bill late?
4. ‘People with overdrafts are bad money
managers.’ Do you agree?
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9 Raising finance
5. What do you think the following saying
mean? Do you agree with them?
a) Time is money.
b) Money is the root of all evil.
c) A fool and his money are soon parted.
d) Money can’t buy you love.
e) Love does much; but money does more.
1
Starting up
MARKET LEADER 4
1 Communication
Listening
Ways of raising finance
MARKET LEADER 4
9 Raising finance
Listening -A
• 9.1 Listen to the first part of an interview
with Rosemary Leith, co-founder of the
Internet business consultancy
Flametree.com.
• What are the two commonest ways for
businesses to raise finance?
2
Listening: Ways of raising finance
MARKET LEADER 4
Listening 9.1
2
Listening: Ways of raising finance
9 Raising finance
9 Raising finance
MARKET LEADER 4
Keys to 9.1
Equity
2
Listening: Ways of raising finance
MARKET LEADER 4
9 Raising finance
Listening 9.2
•
1.
2.
3.
4.
5.
2
Now listen to the rest of the interview and answer
these questions.
Are start-up companies more likely to raise money
through debt or equity? What about growth
businesses?
Why can debt be more expensive than equity?
Which method of raising finance did Rosemary’s
company choose?
What four factors does the process of raising
money depend on?
What are the advantages of the way Rosemary’s
company raised money?
Listening: Ways of raising finance
MARKET LEADER 4
9 Raising finance
Question 1
1.
•
2
Are start-up companies more likely to
raise money through debt or equity?
What about growth businesses?
Keys: It’s unlikely that start-up
companies will be able to get loans and
finance themselves through debt. More
established growth companies can
finance themselves through debt.
Listening: Ways of raising finance
MARKET LEADER 4
9 Raising finance
Question 2
2. Why can debt be more expensive than
equity?
• Keys: Debt is expensive because there
are regular repayments to be made
lenders. (It isn’t specifically mentioned,
but shareholders will be willing in some
cases to wait quite a long time before
they get any payback on their investment
in the form of dividends.)
2
Listening: Ways of raising finance
MARKET LEADER 4
9 Raising finance
Question 3
3. Which method of raising finance did
Rosemary’s company choose?
•
2
Keys: Equity
Listening: Ways of raising finance
MARKET LEADER 4
9 Raising finance
Question 4
4. What four factors does the process of
raising money depend on?
•
2
Keys: The state of the economy, the
business concept, having the right
people, having contacts with investors.
Listening: Ways of raising finance
MARKET LEADER 4
9 Raising finance
Question 5
5. What are the advantages of the way
Rosemary’s company raised money?
•
2
Keys: The managers kept control of
the company because they were the
controlling shareholders: Rosemary
Leith and her business partner own
the majority of the shares in the
company.
Listening: Ways of raising finance
MARKET LEADER 4
Vocabulary
Financial terms
1 Communication
MARKET LEADER 4
9 Raising finance
A. Word Match
• a) money to carry on
production and keep trading
• b) money a company has
2.risk capital
raised from investors who
bought shares
• c) money invested in a
3.share capital
project with a high chance of
failure
4.venture capital • d) money a company
borrows to start up a new
business
5.working capital
• e) the perceived value of
people and their skills
• 1.human capital
•
•
•
•
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Vocabulary: Financial terms
MARKET LEADER 4
9 Raising finance
B. Match the following expressions with
the correct definitions.
1. I took out a……………. to extend the factory.
a) credit
b) debt
√ c) loan
2. He offered his home as security or……………
when he borrowed from the bank.
c) warranty
√ a) collateral b) deposit
3. The………………….rate on the loan was 15%.
a) charge
b) fee
√ c) interest
3
Vocabulary: Financial terms
MARKET LEADER 4
9 Raising finance
4. We have a(n)…………………….of $1 million
to finance our three-month advertising
campaign.
c) expense
√ a) budget b) cost
5. They have to pay the loan back over three
years. The first…………is due in August.
a) amount √ b) installment
c) part
6. Our state-of-the-art machinery is our
major…………………….
√ a) asset
b) possession
c) property
3
Vocabulary: Financial terms
MARKET LEADER 4
9 Raising finance
7. We want to find a partner who will take
a ……………………..in our business.
√ c) stake
a) risk
b) share
8. Thanks to a government…………………the
firm was able to move to a new location.
a) contribution √ b) subsidy
c) support
9. Money owed by a company to its suppliers
forms part of its…………….
√ b) liabilities
a) damages
c) losses
10. When the bank grants a business
an………………..facility, their current account
can go into the red.
b) overhead c) overpayment
√ a) overdraft
3
Vocabulary: Financial terms
9 Raising finance
MARKET LEADER 4
Reading
Financing start-up
businesses
Language points of the text
poised (L.5)
adj. completely ready to do sth. or for sth.
to happen, when it is likely to happen soon
poised to do sth.
Spain was poised to become the dominant
power in Europe.
poised on the brink/edge of sth.
The economy is poised on the edge of
collapse.
catalyst (L.6)
noun, sth. or someone that causes an
important change or event to happen
catalyst for
They hope his election will act as a catalyst
for reform.
conducive (L.20)
adj. be conducive to sth., if a situation is
conducive to sth. such as work, rest etc, it
provides conditions that make it easy for
you to work etc:
an environment conducive to learning.
Other things being equal, visual
improvements are conducive to survival
and reproduction.
sanctuary (L.49)
noun. a place where people who are in
danger from other people can go to be
safe.
• Fleeing refugees found sanctuary in
Geneva.
• His church became a sanctuary for
thousands of people who fled the civil
war.
scramble (L.55)
verb. If you scramble over rocks or up a hill, you
move quickly over them or up it using your
hands to help you.
• Tourists were scrambling over the rocks
looking for the perfect camera angle.
• She scrambled down the tree as quickly as
she could.
Article B
entrepreneurship (L.2)
• noun. the state of being an entrepreneur,
or the activities associated with being an
entrepreneur.
• Entrepreneurship is often a difficult
undertaking, as a vast majority of new
businesses fail.
averse (L.30)
• adj. formal, unwilling to do sth. or not
liking sth.
• be averse to (doing) sth.
• Jim is averse to using chemicals in the
garden.
• Some banks are risk averse (=do not like
taking a risk).
equity (L.67)
• noun. shares in a company from which the
owner of the shares receives some of the
company's profits rather than a fixed
regular payment
• The rankings were based on return on
equity.
stake (L.68)
• noun. if you have a stake in a business,
you have investedmoney in it
• hold/have a stake in sth.
• He holds a 51% stake in the firm.
9 Raising finance
MARKET LEADER 4
Look at the exercises
4
Reading: Financing start-up businesses
MARKET LEADER 4
9 Raising finance
Reading -A
•
Scan the two articles on page 79 and
match them to the following statements.
1. Emerging entrepreneurs will be essential to
the future prosperity of the country.
2. With banks reluctant to lend, many
entrepreneurs have looked to family and
friends for help providing start-up capital.
Article A: statement 1
Article B: statement 2
4
Reading: Financing start-up businesses
MARKET LEADER 4
9 Raising finance
Reading -B
• Work in pairs. Student A reads article A;
Student B reads article B. Do not read
your partner’s article yet.
4
Reading: Financing start-up businesses
MARKET LEADER 4
9 Raising finance
Reading -C
• True or False
F
1. In both countries entrepreneurship has
always been an important part of the culture.
‘Only now is Japan starting to develop a
business environment conducive to
entrepreneurial growth’. But in Italy,
‘entrepreneurship seems part of the culture’.
4
Reading: Financing start-up businesses
MARKET LEADER 4
9 Raising finance
Reading -C
• True or False
F
2. In both countries businesses usually start
with finance from banks.
In Japan, capital was available from banks, but new
companies found it hard to obtain: ‘The head of a
big bank … doesn’t know what it’s like trying to
raise ¥500,000’. In Italy, ‘banks have… become
risk-averse and reluctant to lend’.
4
Reading: Financing start-up businesses
MARKET LEADER 4
9 Raising finance
Reading -C
• True or False
T
3. Risk money is available in Japan, but not
readily available in Italy.
‘… the country has attracted [risk capital]’.
Whereas in Italy, in one study, out of ‘scores of
entrepreneurs’ only two had obtained capital.
4
Reading: Financing start-up businesses
MARKET LEADER 4
9 Raising finance
Reading -C
• True or False
F
4. Families often provide finance for start-up
companies in Italy and Japan.
Families are not mentioned in the article about
Japan. It’s true of Italy, where people ‘borrow
from parents, other family members and friends’.
4
Reading: Financing start-up businesses
MARKET LEADER 4
9 Raising finance
Reading -C
•
True or False
T
5. Both governments want to promote
schemes to encourage new businesses.
‘Japanese authorities have been [making] the
country’s legal and structural framework more
venture business-friendly.’ (We can assume this
includes specific schemes.) In Italy, there ‘is an
outstandingly successful government-funded
scheme to encourage young entrepreneurs’.
4
Reading: Financing start-up businesses
MARKET LEADER 4
9 Raising finance
Reading -D
• Match the definitions below to words in the
articles. Then use the words in sentences
of your own.
4
Reading: Financing start-up businesses
9 Raising finance
MARKET LEADER 4
Article A
• something that causes an important
catalyst
change or event to happen
(para 1)
• to encourage something to happen over a
foster
period of time
(para 3)
• favouring people who want to start up new
entrepreneur-friendly
businesses
(para 3)
• a company paid to do part of the work of
subcontractor
another company
(para 2)
4
Reading: Financing start-up businesses
9 Raising finance
MARKET LEADER 4
Article B
• a company’s business expressed as sales of
turnover
goods and services over a period of time. (para 3)
• shares that one company owns in another
equity stakes
company
(para 5)
• a loan which is not guaranteed by the borrower’s
unsecured
loan
assets
(para 5)
• a bank that deals with businesses rather than the
merchant bank
public
(para 2)
4
Reading: Financing start-up businesses
MARKET LEADER 4
9 Raising finance
Reading -E
• Study the order of the underlined words in
the sentence from article A. Then rewrite
the sentences below beginning with the
words in brackets. Discuss how the
meaning of the sentence is affected in
each case.
4
Reading: Financing start-up businesses
MARKET LEADER 4
9 Raising finance
Reading -E
•
E.g. Only now is Japan starting to
develop a business environment
conducive to entrepreneurial growth.
1. (Seldom…) We rarely have goods
returned to us because they are faulty.
• Seldom are goods returned to us
because they are faulty.
4
Reading: Financing start-up businesses
MARKET LEADER 4
9 Raising finance
Reading -E
2. (At no time…) He never apologized for
his mistake.
• At no time did he apologize for his
mistake.
4
Reading: Financing start-up businesses
MARKET LEADER 4
9 Raising finance
Reading -E
3.
•
4
(Under no circumstances…) The budget
must not be exceeded.
Under no circumstances must the
budget be exceeded.
Reading: Financing start-up businesses
MARKET LEADER 4
9 Raising finance
Reading -E
4. (Only by…) We will increase sales
significantly by spending more money on
advertising.
• Only by spending more money on
advertising will we increase sales
significantly.
4
Reading: Financing start-up businesses
MARKET LEADER 4
9 Raising finance
Reading -E
5. (On no account…) Private calls should
not be made from the office.
• On no account should private calls be
make from the office.
4
Reading: Financing start-up businesses
MARKET LEADER 4
1 Communication
Skills
Negotiating
9 Raising finance
MARKET LEADER 4
Negotiating
• A. Which of these negotiating tips do you
agree with? Explain why or why not.
1. In the early stages, you need to ask the other
side a lot of questions.
2. Always interrupt if you don’t understand sth.
3. Never make a concession for free. Always
get sth. in return.
4. Use simple, direct language and be open
about your aims.
5
Skills: Negotiating
9 Raising finance
MARKET LEADER 4
Negotiating
5. Signal what you are going to do. For example,
say, ‘I’d just like to clarify that’.
6. Summarize often so that everyone is clear
when you reach agreement.
7. Adapt your language so that you don’t
appear aggressive.
8. Talk about your emotions and how you are
feeling.
5
Skills: Negotiating
MARKET LEADER 4
9 Raising finance
B. Research shows that skilled negotiators
often use techniques 1-5 below to achieve
their negotiating objective. Match the
techniques to their definitions.
•
•
•
•
•
•
5
Open questions:
Closed questions:
Softening phrases:
Signalling phrases:
Summasrising:
Skills: Negotiating
MARKET LEADER 4
9 Raising finance
B. Research shows that skilled negotiators
often use techniques 1-5 below to achieve
their negotiating objective. Match the
techniques to their definitions.
• Open questions:
• gather information and explore the
opposite number’s views.
• Closed questions:
• check understanding and ask for
precise information.
5
Skills: Negotiating
MARKET LEADER 4
9 Raising finance
• Softening phrases:
• modify language so that it does not
appear too aggressive.
• Signalling phrases:
• say what you are going to do before
you do it.
• Summasrising:
• go over the points covered to
highlight when agreement is reached.
5
Skills: Negotiating
MARKET LEADER 4
9 Raising finance
C. Match the statements and questions below to
the headings in the Useful language box. Then,
make up two expressions of your own for each
heading.
Closed
question
1. Can you offer any
collateral?
Closed
2. What sort of figure
doquestion
you have in mind?
Open question
3. What sort of benefits
are you looking for?
4. There seems to be a discrepancy in your
Softening phrase
figures.
5. Let me clarify my last point. What I meant
Signalling phrase
was…
5
Skills: Negotiating
MARKET LEADER 4
9 Raising finance
Summarising
6. Can I just recap?
phraseour problem.
7. I’m afraid that Softening
doesn’t solve
8. Could I make a suggestion? Why don’t we
Signalling phrase
renegotiate the loan?
9. When can you Closed
begin question
repayment?
10.Let’s go over what
we’ve agreed.
Summarising
5
Skills: Negotiating
MARKET LEADER 4
9 Raising finance
D. Work in pairs. Role play the following
situation.
• A financial manager learns that he / she has
been posted to one of the company’s
subsidiaries in a developing country. He /
she does not really want to take up the
posting but cannot refuse because it will
improve his / her career prospects. He / she
meets the Personnel Director to negotiate
better financial terms for the posting.
5
Skills: Negotiating
MARKET LEADER 4
9 Raising finance
• Financial Manager: turn to page 148.
• Personnel Director: turn to page 155.
5
Skills: Negotiating
MARKET LEADER 4
9 Raising finance
Case study
Vision Film Company
9 Raising finance
MARKET LEADER 4
Task
• Work in groups.
• Group A: Director and Executive Producer
of Vision Film Company (turn to page 153).
• Group B: Directors of European Finance
Associates (turn to page 150).
• Read your role cards and prepare for the
negotiation. Then hold a meeting and
negotiate a suitable agreement.
6
Case study: Vision Film Company
9 Raising finance
MARKET LEADER 4
Background
6
Activity
Film making
Based
Krakow, Poland
Founded
15 years ago
Output so far
commercials and documentaries,
some award-winning
Personnel
production staff plus freelancers
Case study: Vision Film Company
9 Raising finance
MARKET LEADER 4
Background
Current project
Finance source
Provisional finance
package
feature film set in post-war
Europe
European Finance Associates
$ 10 million
Stage in negotiations
second meeting next month
to finalise
Usual investment
return
sum invested + interest +
share of profits
6
Case study: Vision Film Company
9 Raising finance
MARKET LEADER 4
Writing
• As Executive Producer of Vision Film
Company or as a Director of European
Finance Associates, write an e-mail to all
senior staff informing them of the results of
the negotiation and indicating how the
project will proceed.
• Writing file page 139
6
Case study: Vision Film Company
MARKET LEADER 4
9 Raising finance
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MARKET LEADER 4
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