Counseling the Finance Function

 

Financing is an essential element for establishing a new business, launching a new product or service, or expanding an existing business through internal growth or acquisition.  For example, cash is necessary in order for a company to continue operations while awaiting payment from customers and anticipated increases in sales; expand the volume of sales of existing products through increased advertising and promotion; develop or acquire new technical skills and assets, including acquisitions of other firms; enter specified new markets, including new facilities and recruitment of personnel; create new products that address a specified market need, including research and development; replace or upgrade ageing or obsolete facilities or equipment; or comply with regulatory requirements, such as health standards or environmental laws.

It is likely that entrepreneurs and managers will, regardless of the size of their businesses, need to venture into the world of finance several times over the life cycle of the enterprise.  In that world they will encounter a wide range of participants, including banks, venture capitalists, investment bankers, government agencies, and business advisors, each of which will provide unique resources and experience.  Capital suppliers have become increasingly innovative in devising financing techniques that are tailored to their needs and the goals and objectives of the businesses they serve.  However, before managers can begin the onerous process of securing funding, they must develop a careful plan for identifying the financial requirements of the business, the terms upon which the company hopes to secure the necessary funds, and the potential sources for the funding.  Of course, this assumes that management has already developed a “plan” for the business, product, concept or service, and has developed an outline of all of the requirements for successfully completing the plan (i.e., capital resources, human resources, other assets, marketing strategies and tactics).

As a business counselor, one of the most important things that you will be doing is providing advice and transactional support to your clients on their financing activities.  Chapter 250 of Business Transactions Solution (§§ 250:1 et seq.) on WESTLAW provides a general overview of business financing activities which should be reviewed along with the specific types of financing transactions listed below. The materials include a Master Form of a questionnaire for use in assisting management in developing information on financial aspects of the business which can be used in presentations to prospective investors. The chapter discusses some of the steps to be taken to determine the financing requirements of a business, as well as various sources of capital. The chapter also analyzes the relationship between the company’s stage of development and financing alternatives and lists various considerations that the company should always take into account in selecting among financing proposals. Also, the role of legal counsel in the company’s financing strategy is covered.

This month we are adding several new training and practice tools to help you become better counselors to the finance function:

  • Slide Deck presentation: Counseling the Finance Function (§150:104)
  • Business Counselor’s Training Materials: Basic Elements of the Capital Structure (§150:105)
  • Business Counselor’s Training Materials: Counseling the Finance Function (§150:106)
  • Business Counselor’s Training Materials: Organization and Management of the Finance Function (§150:107)

Related issues are covered in the transactions on Corporate Equity Financing (§§ 154:1 et seq.), Corporate Debt Financing (§§ 155:1 et seq.), Venture Capital Financing (§§ 156:1 et seq.), Registered Public Offerings (§§ 288:1 et seq.), and Commercial Debt Financing (§§ 157:1 et seq.). Other transactions cover Offering and Disclosure Documents (§§ 152:1 et seq.), Finders’ Arrangements (§§ 153:1 et seq.), Underwriting and Distribution Arrangements (§§ 289:1 et seq.), Issuance of Corporate Securities (§§ 37:1 et seq.), Business Valuation (§§ 293:1 et seq.), Securities Law Compliance (§§ 151:1 et seq.), and Noncorporate Investment Financings (§§ 56:1 et seq.).

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