Financing is the act of finding solutions to bring to completion.
By extension, the solution most often used being money, it represents the act of making a capital available for a project.
Funding is mostly gathered from Investors by a Financier or an Investment Bank distributing securities on behalf of a company called Issuer because it issued its securities.
There are two main forms of financing:
- The Credit, also called Debt.
- The Equity (of Own Funds) also called Capital or Contribution.
The Financing Principle
Strangely, the principle of financing by a securities market is to
exchange information allowing the Investor to appraise the investment opportunity against an investment.
Here are the reasons:
- To invest, the investor needs to know that the opportunity exists.
- It must be able to evaluate the risk / reward ratio.
- Familiarity creates trust, the illusion of information and the illusion of control.
Criteria for Admission to Financing
In order for a company to be admitted as an Issuer by the Financial Community, it must meet the following criteria:
- Operate in a buoyant market.
- Be transparent.
- Do not be a One Man Show.
- To have a Competent Management, in Team.
- Have a unique character.
- Have a Competitive Advantage.
- Being international or at least present in the country of quotation, usually the United States.
Who wants a Capital must provide to any Prospect without it requiring it. Any material information of such a nature as to enable it to form an accurate and complete opinion or to be able to affect its judgment as an Investor.
PROVIDING FALSE INFORMATION, OMITTING REAL INFORMATION, FAVORABLE OR NOT DELAYS.
The information is provided in the form of a Prospectus describing the Issue, more or less complete, which may have several designations:
- The Prospectus or Disclosure Document are generic terms.
- The Summary, Abstract or Executive Summary is a summary which should be limited to determining the interest of the Prospect for Investment.
- The PPM, Private Placement Memorandum or Private Offering Memorandum are terms designating a Prospectus describing a Private Issue.
- The Preliminary Prospectus or Red Herring is a term designating a provisional prospectus (without Price or Issue Date) describing a Public Issue.
- The Public Offering Prospectus is a term designating a prospectus describing a Public Offering.
- Deriving from the word Finance, the definition of the word Financing is therefore the Act of finding solutions to carry out.
- By extension, the most common solution being money, it represents the Act of Provision of a Capital.
- Most of the time, in the world of Finance, a Financier brings together the Financing of the Company (also called Issuer), through the sale of Securities to Investors through Brokers and Traders.
- The Financing Class
- There are two main categories of financing:
– The Debt in English Debt, in which all forms of Credit can be found.
– Equity also called Capital, which includes all of the fhe forms of Contribution.
Sources of Financing
There are several Sources of Financing, each corresponding to a Type of Capital, an Investor Type and therefore a specific psychological profile:
- The Love Money
- The Seed Money
- Venture Capital
- Gage Financing (Secured Capital)
- Strategic Financing (Corporate Partners)
The Source that interests us mainly is Love Money, the others being out of our subject and being the subject of another course called “Capital”.
Affective financing is the one given by the entourage, people who love the Entrepreneur not for this quality, but because he is above all a human being, a relative, a friend, a close relative.
It can be said that the main characteristic of Emotional Capital is that the investor’s motivation is not financial.