Finance through banks

But how can we finance the acquisition of the network of cake shops?

It's a considerable investment. The Baker doesn't have the funds and his Venture Capitalists want to realize part of their capital gains. What does he do?

A well-established, big enough enterprise reassures bankers, who know how to play their role when the risk is controllable: the Baker can convince them to accompany him in his growth, starting with this acquisition.

To his considerable surprise, the Baker is welcomed by his banker who suggests entering into a long-term partnership. He buys the cake-shop network.

  1. The Banks come into play

    Risk analysis in banks forces them to only finance organizations for which they have financial visibility.
    They cannot therefore be the first port of call for the first, very risky, steps of starting up the Enterprise. It is impossible for the Enterprise, in its early days, to provide sufficient guarantees to the banks: whatever the initial successes may be, we do not have enough background history to prove the repayment capability.
    Bankers become involved when the new Model has proved itself and when we need to finance the growth.
    The method goes more through a financial analysis than in the analysis of the validity of the project or the quality of the teams that were the key criteria in the first stages.

  2. Listing on the Stock Exchange is also an option

    From at least 10 million euros, being listed on the stock exchange can be a source of financing.
    The procedure is quite complex, coming with certain legal and regulatory constraints.
    It is one way of diversifying the sources of financing, of increasing the renown of the Enterprise and offering an exit route for historical investors (Business Angels or Venture Capitalists). It can also have an important impact on employee motivation.

Licence Creative Commons
The story of George the Baker is made available under the terms of the
Creative Commons Attribution - NoDerivatives 4.0 International license.
Table of Contents


comments powered by Disqus