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Assessing Your Financing Need
The Elements of Risk
A Quick Way to Gauge Uncertainty
Debt and Equity: A Functional Definition
How Lenders Evaluate Credit Risk
How Lenders and Investors Approach Uncertainty Differently
Characteristics of Debt
Forms of Financing
Types of Debt
Equity and Other Forms of Financing
Sources of Financing
Scroll to the bottom of this page for a more complete description of the lessons.
Avoid Financial Entanglement
There are several aspects of a new business that seem so obvious we take them for granted:
- A new business is, by nature, uncertain.
- Flexibility is valuable in the face of uncertainty.
- Cash is readily exchangeable into myriad capacities and resources. That is, cash is extremely flexible (or fungible, as an economist might say).
- Cash is particularly valuable to a new business.
Financing – the act of providing cash to a business – comes in a variety of forms, each of which has strings attached. If you aren’t careful, you can become entangled in a form of financing that doesn’t fit the needs of your business.
Bad financing decisions tend to have long term effects. You can fire an employee that doesn’t work out. You can change suppliers when necessary. It’s tough to fire a co-investor or lender, however.FUNGIBILITY
What You’ll Learn
This course is designed for business owners who are relatively new to the process of growing a company. Unlike most introductory courses, we’re going to examine the motivations of lenders and investors as well as describe the types and sources of financing. You’ll learn about:
- The different types of business finance
- How lenders and investors think about uncertainty, risk, and your business
- How to identify the type of finance best suited to your needs, and
- Where to turn to get the right financing
Tools We’ll Use
For those of you who have enrolled in a version of this course that incorporates a live workshop, we’ll use several online tools to ensure our interactions are productive:
- The short video lessons listed below are organized into three modules. The lessons introduce key concepts to incorporate into your business and financial planning.
- Trusted Sharing allows us to engage in structured conversations to get to know each other and start putting ideas into action before, between, and after live discussions.
- For those enrolled in the self-paced course, you’ll have access to a dedicated chat room.
The Uncomfortable Effort of Thinking Things Through
There is a great deal of excellent material available regarding the what and how of business finance. In this mini-course, I’m asking you to slow down and think hard about why and when. Why do bankers insist upon collateral? When is a short term loan appropriate? Under what circumstances will my growth strategy be consistent with my financing options?
I’ve been wrestling with the challenges of business finance for a long time. Given the meandering course of my career, I’ve been exposed to an unusually broad range of financing experiences, from bootstrapped startups to billion-dollar buyouts. Nevertheless, preparing for this course has forced me to slow down and think harder about my assumptions and understanding. The process has been laborious and uncomfortable at times. That’s the feeling of learning.THE SCIENCE OF THINKING
Business is a lot harder and more complex than we’d like to think. Mastery is a lifetime pursuit. I hope you’ll conclude that the payoff from effortful learning about the right financing for your business is worthwhile.