Financing needs of a Business Plan

The purpose of this part is essential to determine the amount of different funding requirements deemed necessary to ensure the successful completion of the project.
- Need to block funding
- Amount of funds sought
- Return on Investment

Financial documents (see below)
Financial documents in this section should show all the various assumptions and choices made in the development plan (market share, industry growth, costs, investments, sales, etc..), Without revealing to inconsistency.

Output modes investors
Are taken into account by investors as capital gains may be realized by the investor and the liquidity of the investment.

Schedules
Financial Summary

Shared vision and shared the business plan over several years (3 minimum), the synthesis is to transform the information collected and presented in numerical predictions articulated for each period:
- Income statement,
- Cash flow statement
- Balance Sheet

The income statement
Presented on 3 to 5 years it will be monthly or quarterly for the first year.

The cash flow statement
As for the results, it is monthly or quarterly for the first year, giving it a character of annual cash flow forecast and in subsequent years.

Stock
It follows from the operational forecasts (income) and changes in cash flows.
From a starting balance sheet, corresponding to the start of the project, it is proposed for the end of each period of one year of activity.
Thus, in summary, on the economic and financial process of building a business plan is presented as follows:

To form his company size and its financing needs, all entrepreneurs will take care to first identify clearly and precisely what it needs to pursue sustainable business, the resources to implement an outcome will be. Adjustments are being made by the following iterative search for the best balance. It will avoid the opposite approach would be to their needs according to size of capital available to it.

Finally and most importantly, the owner of an SME will never lose sight that beyond these elements 'mechanistic' specific business plan, its primary mission is to sell its business plan to its bankers, partners, teams and other partners. .. Perhaps the theme of another post!

Components of a business plan

Rapid synthesis of the development plan in a few dozen lines, the executive summary should present the key points of the project to enable donors (shareholders and banks) to prompt a general idea and make them want to know more.
This includes:
- Presentation of the offer
- Description of the contract
- Description of Team
- Financing

Presentation of the offer of products / services:
The fundamental purpose of this section is to reach out clearly the characteristics of products and / or services.
The highlighted are:
- The nature of the offer
- Advancement Project
- Key technologies, patents, trademarks
- Prices and rates charged or proposed

Market - Competitive Environment
The market is a delicate operation, especially in emerging markets.
- Market characteristics and actors involved
- Customers

Targets:
The development plan is a management tool that is needed to draw lessons from the past and allow some adjustment. As such, the plan should include objectives that steps the company will achieve.

Business strategies:
The purpose of this section is to outline the strategies adopted to achieve the objectives. The key elements of this offer are products, pricing, distribution and communication.

Management Team - Management - Human Resources:
It is present in this part of the project's key people in describing their role, their experiences and their complement  are  to reveal the correspondence between them and the project.

Legal Aspects:
The description of the legal structure and capital allocation, as well as policy changes in the capital, is needed to assess the degree of coherence of the legal structure chosen (with the possible obstacles or constraints) in relation to development considered the company.
- Form - Calendar
- Changes in share capital
- Industrial Protection.

The Business Plan Part. II

Starting a business is of three main stages, each having a dimension iterative

• The first step is, according to the objectives and motivations that have led to a project to refine its knowledge of the environment in which the company operates, with an approach also known as SWOT EMOFF (Environment / Strengths / Weaknesses / Threats / Opportunities) and requires gathering information about clients, competitors, suppliers, regulators, and the key skills and resources available to the company or must have.

• The second step is to refine the project in terms of Key Success Factors (CSF) and variables or fields of Strategic Actions (VAS).

• The third focuses on the means (technical, human and financial) necessary and action plans from which the Business Plan is the subject of a valuation, and financial economic quantification.

The document that materializes this research, this reflection, the choices that result, the main actions and associated resources is called Business Plan. It has 2 parts:

• The first part, called pitch, is devoted to the arguments needed to validate and sell his project. This part of nature "literary", must be rigorously prepared to highlight the economic consistency of the project.

• The second part corresponds to a financial overview of the measures and Covering the project's economic viability.

The business plan

Starting a business is not only starting a business alone,  it involves raising  funds, developing  an business activity, diversifying it, transmitting , merging, adjusting, developing, negotiating and  communicating your dream business. There are many reasons for embarking on the adventure of developing a business plan.

Creating a project is not only the record of business plan alone but it also includes a financial component and a pitch.

As for investment, in financial terms, it can be defined as "sacrifice resources in hopes to draw more in the future," which indicates three key concepts: duration, cost and risk. Aspects profitability and financial flexibility are at the heart of the case. They underlie substantive issues such as: How to appreciate and take into account the reversibility of a project? Is there a business model in the business plan?

The financial calculations do not remain a simple decision support, and that beyond the virtues and pitfalls, advice and methodology presented in the Business Plan has many facets. And above all the business is a script of a wonderful story and which should be directed by the creator himself. It is the expression of a chosen strategy to be shared more or less detail, among its shareholders, bankers, employees and other stakeholders of the company if necessary.

The medium-term loans

The duration of the medium-term loans is of 2 to 7 years for the financial investments, and they are granted either by a single bank or a bank in competition with a specialized. There must be an association between the period of funding and the life of the asset financed.  The financial borrowing duration should not be longer than the duration of its use as medium-term financing. If it is so it should be avoided in all cases. Hence it is applicable to investments such as average length of vehicles and technology, and more generally, to most goods and means of production of the business. The loan period must be taken into account to the financial possibilities of the business. That is, during this period, company must not only ensure the repayment of the loan, but also interest payments.

In all cases, financial backing by a medium-term loan does not cover the entire investment, it is logical that the business wants to equip them to make an effort for the flow of money. The percentage of the investment program financed by a medium-term credit is generally between 50% and 75% of total investment.

The granting of loan for a medium term from the merchant banker is subject to a broad study because the risk comes from the period and volume of the loan. The merchant banker must study the market impact of the introduction of this equipment and provide the financial situation of the business, given its new production and also because of its new charges. This require  to develop a further plan for the funding that will parallel the total expenses and resources of the borrower, and more over in order to identify future opportunities for the company to meet its debts and thereby ensure a good outcome of operation of credit

Financial planning

Any company needs to invest for its creation of its new development activity. That is to say, new development activity means of production. Besides the flow of funds of its own source, the use of bank loans is the most commonly used practice.

To production every firm need raw materials, labor, and  also a variety of equipment like Land, buildings, manufacturing equipment, etc.. ; All these devices are called the production tool.

Whether for the creation or for development needs every company needs to invest. Once established, they will allow the company to produce more or better conditions, which will enable it to generate additional profits.

A company can finance its investments from internal funds, without recourse to external capital. This solution has the advantage for the company to play independent, but it has the disadvantage of limiting the company in its investment opportunities and the expansion of the company.

Therefore, the use of bank loans is the most commonly used practice because it is  easy and possible way  for almost all small and medium enterprises. However, we must recognize that this funding has disadvantages for the business. It makes the company dependent on the varieties of the distribution of credit (i.e. amount, cost, time, etc.) And the policy adopted by its banker that is choice of risk guarantees, etc.  Among the solutions offered by banks, there is the classic credit medium or long term.

Constraints of financial investments

A company has a priority, to invest its own resources. If its own sources are insufficient, the company must raise its fund as equity. The conditions of funding of productive investment depend on specific characteristics to the financial situation of the company.


 Analysis on the financial investment has long been conducted in a theoretical framework defined by the Modigliani-Miller theorem (1958). According to this theorem, it is immaterial for a company to finance its investments through debt, issuance of shares, or retention of profits. This theorem is only valid under very restrictive conditions, which in practice are not checked: the hypothesis of perfect capital markets, lack of conflict between managers and shareholders, and the absence of distortions and taxation. The strict application conditions of this theorem led to his questioning, and guided the researchers to the idea of ​​an optimal capital structure of companies. Companies are advised to go into debt to take advantage of the leverage and the tax benefit associated with debt. But the growth of debt poses a risk of failure increased. The company must decide between the benefits of debt and the cost of default risk.


The borrowing capacity of a company depends much on its capacity that it can offer, and market conditions (level of interest rates). The level of profits and the level of indebtedness of the company are the two key indicators to assess the repayment capacity of the borrower. In this way, investment is determined by the level of profits and debt.


Economic research highlights the wide diversity of investment behavior of firms. This heterogeneity is largely explained by the different financing terms offered to them. The variable profit rate and debt ratio have explanatory power and real investment by small businesses, but not for the investment of large groups. Small firms have less collateral to offer banks, and therefore more difficult to finance their investments. The constraints are more strengthened in times of slower growth or recession.

The Long term credit

The long-term funding is a funding for a period of not less than seven years. The credit is generally used to finance the purchase or construction of property of significant value, for example, buildings or industrial buildings, large equipment whose useful life is more than seven years.  It is also the capital funding for businesses, but the amortization period exceeds seven years. So it's heavy capital.

 Thus, when a company or an individual looking for a competition to fund the construction of a road, a factory or a building, it is clear that the importance of investment capital is such that reimbursement may be considered in time similar to those of medium-term credit for the good reason that the tax depreciation of these investments may not be realized in the long term.  In fact, the newly built factory will bear fruit only after several years.  It leads inevitably to the concept of depreciation that occurs and determines the time of repayment.

 It is therefore imperative, like the medium term, to focus the profitability of the company and consider the elements on: the evolution of turnover in recent years and its prospects especially future, and the cash flow of past and future, net profit after tax also past and projected.
 
Unlike the medium term, the proportion of bank intervention that is 70% or less of the total project to incur the long term is limited to 50% maximum.  All the rest of the conditions and terms for this category of credit remains the same as the medium term.

 Finally, it is clear that the classification, whether it is long-term credit or the medium term credit is only according to their duration, which is, more than seven years and can reach 20 years and over, for the long term, and between two to seven years for the medium term. The fact remains that it is closely and directly from the purpose and its funded depreciation determines the time of repayment.

US debts and the Chinese pressure!!!

China one of the largest creditor of the United States recently urged Washington to take a precautionary measures to safe guard the investors. This was given after Standard and Poor, the debt rating agency of US gave the warning. On Monday Standard and Poor’s showed the negative views about the debt situation in US. Apart from budget deficits, the main reason was no clear policy to resolve the issue.

The US government has challenged the sensational negative announcement of Standard and Poor’s views, and said the agency had under estimated the government’s efficiency. The fact remains that this deterioration in the U.S. took effect on global trade, the Shanghai falling by 1.91% Tuesday.

 According to the US government, as on August 2010, China had a total of 868.4 billion dollars in U.S. Treasuries. Hence China fears that any explosion of US debt will further weaken the American dollar which will result in a de facto devaluation of Treasury bills held by China.

By posting a negative outlook, Standard & Poor's warning seems to Beijing on the inability of U.S. policy to contain the situation, context likely to impact significantly the value of Chinese investment in dollars or even encourage an overhaul of global financial system currently focused on the dollar.

Some analysts however said China appears to have little choice, its accumulation of foreign currency forcing it to invest more than $ 50 billion out of the territory each month. Indeed there are some more alternative markets of sufficient size as that of US market is there to accommodate the Chinese fund.

Gold extended its record-breaking rally

The gold reached the record of 1500 dollars an ounce, It has never been a similar rise in the financial markets. With this crisis and expressed fears about the U.S. deficit and debt in Europe, investors prefer to acquire more gold to slow the risks.

It is obvious that holding gold resources does not yield large monetary benefit, but may qualify its holder as a good asset. In times of financial instability, investors are constantly looking for safe way to invest. The gold is the best immediate alternative for them. Hence this is the reason for this recorded historic outbreak in gold rate.

Since most of the global market is unstable this trend may continue and hence more procurement by the investors will lead to more price rise. In our neighboring country China inflation was reached 5.4% as on March 2011and hence their banks are required to increase the reserve and hence there is no immediate down trend in the price of yellow metal. The current crisis and un rest in African and Middle East countries are another main reason for the price raise of the yellow metal.

In relative point of view; the prevailing price of Gold is not expensive compared with the price of 1980 considering the inflation in price in mind. Even the poor man’s gold also rose to certain extent and the metal traders highly praise this metal.


However, all metals are not aware of such enthusiasm from buyers. The platinum price has not changed while that of palladium was down 6%. Their courses have been affected by the earthquake and tsunami in Japan.

Saudi Arabia And The Present Oil Crisis

The impact of the current situation in Libya on oil prices offer some advantages to some of the OPEC countries. While oil prices soaring, driven in particular by fears of shortages, Saudi Arabia is trying to pull out of the game by offering his "help". Finally, Saudi Arabia is trying to utilize this opportunity to inflate its oil wealth to greater extent.

Last Sunday, the Saudi oil minister has said in his country, as a leading member of OPEC, Saudi Arabia is ready to meet any additional supply to full fill the international demand. More over Minister Al al Nuaimi told they have enough stock as reserve for the supply since the raise in demand of Asian countries are more. Moreover he said their offer would impact heavy on the oil markets. Saudi Arabia the world's biggest exporter had already lowered its production. It was 8.29 million barrels per day in March against 9.1 million barrels per day in February.

Most of the petroleum user countries urged the Organization of Petroleum Exporting countries to raise its production targets in an attempt to stop the current surge in oil prices. Here I wish to point out one thing, in late February, Tehran has called on member countries of OPEC, and in particular Saudi Arabia not to  unilaterally raise their crude production. Iranian Oil Minister Massoud Mir Kazemi, emphasized the OPEC members not to take hasty unilateral decisions in case of any shortage in Oil. And their argument is current production suffices to fill the gaps created by the Libyan internal crisis.

Gold hits another record

The gold price has again hit a record on Friday, getting closer every day just over a threshold of 1,480 dollars an ounce.

Main factors leading to this historical rise were; the worrying situation of some of the member countries of the European Union beset by serious difficulties with their internal debt and sustained rise in inflation.

The price of an ounce of gold has risen to its latest peak on Friday in the international market, by breaking the previous Monday record.

According to the Analysts the investors in Greece, Portugal remained concerned over the threat of default, a situation that encourages them to buy precious metals, which are the safe-haven assets.

 The debt restructuring in Greek, Ireland also raised the new concerns and hence the raise in the precious metals.

On Friday, ratings agency of France lowered the rating two notches in their country alone.

Another main reason for this rise is; the Investors are alarmed of the signs of runaway inflation. Many European countries afraid, that their local market gold price will be in raise compared with the expected price in China and India. The sovereign debt and the inflations of some of the countries are the main reason behind the rise.

Because of the market instability, threat of default in certain European countries and inflation kept the precious metal price on its present high. You have put eye on the market trend for few more days to predict the trend of the precious metal.

Stock Market Basics-4

The risks involved in investing Equities
The share prices are affected by factors that comes from within the company ( change of Management, change of policy of company, change of Human resources, fires and accidents in a company ), and the factors outside the company ( General Market condition, Economy, Sector demand and supply, Government Policies, International Wars, Foreign Policy, Demand in the International Markets, etc ).
So equities involves risk. But in a fixed deposit the risk is almost nil ( But it too have some risk. In case, if a Bank fails ). As we have seen earlier, Equities are riskier but they give good rewards. So while investing we should reduce our risk. How can one reduce the risk involved in equities.

Here comes diversification. One should not invest the entire amount at his disposal in a single share or sector. To reduce risk one should use basket of stocks. If one stock or one sector underperforms the market, the other sector or stocks which performs well will compensate the growth. Thus one can see good growth of his portfolio.

Impact of Tsunami on Japan’s Economy

Ever since Japanese Stock Index Nikkei touched 40,000 on January of 1990, it has been in decline. It touched a low of 7000 in 2008. For more than 18 years, Nikkei has been in decline. This says the sorry state of Japan’s Economy. Japan’s Economy was affected by the 2008 recession. Since then, it has been in a minor recovery path.

 

But the present Tsunami, has dashed the hope of full recovery of Jhttp://www.blogger.com/img/blank.gifapan’s Economy. It is being estimated that more than 200 billion of USD was lost in the Tsunami. World Bank has estimated that it may take another 5 years to repair the damages. It is surely a disaster for Japan Economy.

 

Constructing a Atomic power station is not a easy job. It needs lot of money and time. The damaged Atomic power station may need lot time and money to repair it. Since this devastation is caused not only by Tsunami, it is devastated by earth quake as well. Lot of buildings, roads and infrastructure has been damaged in the main land. Though financially, these loss can be manageable by any country, Japan at this stage, given their poor state of economy, cannot afford this disaster.