3. • Innovative sources and mechanisms of funding are
non-traditional modes of financing
• Finance is made available to the Business
Organisations breaking the conventions
• All the innovative sources are evolved in response to
the magnified and divergent need for Finance
What are Innovative Sources?
4. • Non – Traditional
• Tailor Made
• Mobility
• Finance on Demand
Why called ‘Innovative’?
6. • Financing a new, growing, or troubled business
• Knowledge of the significant risk associated
• Investment in exchange for an equity stake
• Expects a better-than-average return
Meaning
7. • Money provided by investors to start-up
firms and small businesses with perceived
long-term growth potential and substantially
high risk , in exchange of an equity stake
expecting a better than average return.
Definition
8. • New Business
• Limited Operating History
• No capital market access
• Perceived long term growth potential
Who opt VC?
9. • Not necessarily just one wealthy financier
• Ltd. partnerships with pooled investment capital
• Small group of investors
• Affiliate or subsidiary of a;
1) Large commercial bank
2) Investment bank or
3) Insurance company
Who can be a Venture Capitalist?
10. • Commercially Viable
• Identifiable Market
• Strong Management
• Sustainable Competitive Advantage
What do Venture Capitalist look for?
11. • Participation in Equity
• Long – Term loans
• Participation in Management
• Risky Capital
• Exit Option
Features
22. • The process of involving Several different lenders in
providing various portions of a loan.
• Borrower requires a large sum of capital that may either
be too much for a single lender to provide, or
• May be outside the scope of a lender's risk exposure
levels.
• Multiple lenders together provides a single loan on
agreed terms and rates through an agent - ARRANGER.
Meaning
23. • Syndicated loan is one that is provided by a group of
lenders and is structured, arranged, and
administered by one or several Institutional Lenders
or investment banks known as arrangers.
Definition
24. • When there is huge requirement for fund,
such as in case of;
1) Mergers
2. Acquisitions and
3) Buyouts
When a Syndicated loan is opted?
28. • The Borrower appoints the Arranger via a Mandate
Letter
• The content varies according to whether;
1. The Arranger is mandated to use its "best efforts" to
arrange the required facility or
2. If the Arranger is agreeing to "underwrite" the
required facility.
Mandate Letter/ Commitment Letter
29. • The Mandate Letter will usually be signed with a Term
Sheet attached to it.
• The Term Sheet is used to set out the terms of the
proposed financing prior to full documentation.
• It sets out the parties involved, their expected roles and
many key commercial terms
Term Sheet
30. Example :
1. Type of facilities
2. Facility amounts
3. Pricing
4. Term of the loan and
5. Covenant package
31. • Prepared by both the Arranger and the borrower
• Arranger forwards to potential syndicate members.
• Includes description of the borrower's business,
management, accounts, details of the proposed loan etc.
• It is not a public document and all potential lenders that
wish to see it usually sign a confidentiality undertaking.
Information Memorandum
32. • Prepared if the syndicate comes to a conclusion and
borrower is agreed upon
• It sets out the detailed terms and conditions on which
the Facility is made available to the borrower.
• The repayment structure, Interest rates, Covenant
stipulations etc are drafted here
Syndicated Loan Agreement
33. • Made between borrower and arranger
• Borrower has to pay the arranger a specific fee for its
specialised services
• Fee letter contains the rates and the conditions and
structure of such payments.
Fee Letters