MARKET LEADER 4 Unit 9 Raising Finance 9 Raising finance

MARKET LEADER 4

Unit 9

Raising Finance

9 Raising finance

MARKET LEADER 4 9 Raising finance

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5 Skills: Negotiating

Starting up

Reading: Financing start-up businesses

Listening: Ways of raising finance

6 Case study: Vision Film Company

Vocabulary: Financial terms

Starting up



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?

1 Starting up


Possible issues:a) Bank:• Advantages:Advantages: it’s a business transaction

that doesn’t involve friends. • DisadvantagesDisadvantages ：：• 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.

1 Starting up


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.

1 Starting up


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

1 Starting up


Discussion questions:

2. Imagine you have just won $300,000. You want to use it to secure your long-term 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?

1 Starting up


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

Listening

Ways of raising finance

MARKET LEADER 4 1 Communication


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?

Listening: Ways of raising finance2


Listening 9.1




Equity

Keys to 9.1


Listening 9.2• Now listen to the rest of the interview and answer

these questions.1. Are start-up companies more likely to raise money

through debt or equity? What about growth businesses?

2. Why can debt be more expensive than equity?3. Which method of raising finance did Rosemary’s

company choose?4. What four factors does the process of raising

money depend on?5. What are the advantages of the way Rosemary’s

company raised money?



Question 1

1. 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.



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.)



Question 3

3. Which method of raising finance did Rosemary’s company choose?

• Keys: Equity



Question 4

4. What four factors does the process of raising money depend on?

• Keys: The state of the economy, the business concept, having the right people, having contacts with investors.



Question 5

5. What are the advantages of the way Rosemary’s company raised money?

• 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.


Vocabulary

Financial terms



A. Word Match• 1.human capital

• 2.risk capital

• 3.share capital

• 4.venture capital

• 5.working capital

3 Vocabulary: Financial terms

• a) money to carry on production and keep trading

• b) money a company has raised from investors who bought shares

• c) money invested in a project with a high chance of failure

• d) money a company borrows to start up a new business

• e) the perceived value of people and their skills


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.

a) collateral b) deposit c) warranty

3. The………………….rate on the loan was 15%.

a) charge b) fee c) interest


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B. Match the following expressions with the correct definitions.


4. We have a(n)…………………….of $1 million to finance our three-month advertising campaign.

a) budget b) cost c) expense

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


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7. We want to find a partner who will take a ……………………..in our business.a) risk b) share c) stake

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…………….a) damages b) liabilities c) losses

10. When the bank grants a business an………………..facility, their current account can go into the red.a) overdraft b) overhead c) overpayment


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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 soonpoised 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 happencatalyst 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.

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.

Article B

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 invested money in it

• hold/have a stake in sth.

• He holds a 51% stake in the firm.


Look at the exercises

4Reading: Financing start-up businesses


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

4Reading: Financing start-up businesses


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


Reading -C

• True or False

1. In both countries entrepreneurship has always been an important part of the culture.


F

‘Only now is Japan starting to develop a business environment conducive to entrepreneurial growth’. But in Italy, ‘entrepreneurship seems part of the culture’.


Reading -C

• True or False

2. In both countries businesses usually start with finance from banks.


F

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’.


Reading -C

• True or False

3. Risk money is available in Japan, but not readily available in Italy.


T

‘… the country has attracted [risk capital]’. Whereas in Italy, in one study, out of ‘scores of entrepreneurs’ only two had obtained capital.


Reading -C

• True or False

4. Families often provide finance for start-up companies in Italy and Japan.


F

Families are not mentioned in the article about Japan. It’s true of Italy, where people ‘borrow from parents, other family members and friends’.


Reading -C• True or False

5. Both governments want to promote schemes to encourage new businesses.


T

‘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’.


Reading -D

• Match the definitions below to words in the articles. Then use the words in sentences of your own.



Article A

• something that causes an important change or event to happen (para 1)

• to encourage something to happen over a period of time (para 3)

• favouring people who want to start up new businesses (para 3)

• a company paid to do part of the work of another company (para 2)


catalyst

foster

entrepreneur-friendly

subcontractor


Article B

• a company’s business expressed as sales of goods and services over a period of time. (para 3)

• shares that one company owns in another company (para 5)

• a loan which is not guaranteed by the borrower’s assets (para 5)

• a bank that deals with businesses rather than the public (para 2)


turnover

equity stakes

unsecured loan

merchant bank


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.



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.



Reading -E

2. (At no time…) He never apologized for his mistake.

• At no time did he apologize for his mistake.



Reading -E

3. (Under no circumstances…) The budget must not be exceeded.

• Under no circumstances must the budget be exceeded.



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.



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.


Skills

Negotiating



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.



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.



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:

• Closed questions:

• Softening phrases:

• Signalling phrases:

• Summasrising:

• 5 Skills: Negotiating


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.



• 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.



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. 1. Can you offer any collateral?

2. What sort of figure do you have in mind?

3. What sort of benefits are you looking for?

4. There seems to be a discrepancy in your figures.

5. Let me clarify my last point. What I meant was…


Closed question

Closed question

Open question

Softening phrase

Signalling phrase


6. Can I just recap?

7. I’m afraid that doesn’t solve our problem.

8. Could I make a suggestion? Why don’t we renegotiate the loan?

9. When can you begin repayment?

10.Let’s go over what we’ve agreed.


Summarising

Softening phrase

Signalling phrase

Closed question

Summarising


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.



• Financial Manager: turn to page 148.• Personnel Director: turn to page 155.


Case study

Vision Film Company



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.




production staff plus freelancersPersonnel

commercials and documentaries, some award-winning

Output so far

15 years agoFounded

Krakow, PolandBased

Film makingActivity

Background


Background

sum invested + interest + share of profits

Usual investment return

second meeting next month to finalise

Stage in negotiations

$ 10 millionProvisional finance package

European Finance AssociatesFinance source

feature film set in post-war Europe

Current project



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



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MARKET LEADER 4 Unit 9 Raising Finance 9 Raising finance