The cost of capital for a business is the average of the cost of equity and the cost of debt. The weighted average cost of capital formula (WACC) takes into account the level of debt and equity finance used to fund a business to calculate its true cost of capital.
The business life cycle model uses 4 stages start-up, growth, maturity, and decline to define the different phases a business will experience in its lifetime. Each stage comes with its own characteristics and problems to solve, and the business must determine which stage has been reached in order to be able to plan and forecast effectively.
Angel funding is used to provide a startup business with equity investment to fund growth. The angel investor is seeking higher returns for the risks involved and tries to limit the initial valuation placed on the business in order to maximize their equity percentage.
The availability of finance for a startup business determines its ability to expand and grow. By using bootstrap finance the growth will be slower but the value of the business needed to meet the personal financial goal of the entrepreneur will be smaller.
The free cash flow valuation calculator can be used to value the operations of a startup up business. The calculator uses the free cash flow generated by the business and discounts this at its weighted average cost of capital.
Crowdfunding is a technique for a business to obtain finance in which small amounts of funding are raised from a large number of people (the crowd). Crowdfunding can be either rewards, debt or equity based depending on the requirements of the business.
This monthly lease payment calculator works out the monthly payment (Pmt) needed at the end of each month taking into account the cost of the asset (C), its residual value (R), the lease interest rate (i), the number of payments (n), and the number of advance payments (a) required by the lease agreement.
Last modified February 11th, 2019 by Michael Brown
The 5 C’s of credit is one technique used by financial institutions to assess the credit worthiness and risks associated with lending to a business seeking debt finance. An understanding of the five C’s of credit combined with financial projections, will allow a business to be better prepared when approaching lenders for debt funding.