Ladies and gentlemen, as you know we have decided on Italy as the location of our Greenfield investment. Our next order of business is to obtain external financing for the project in the amount of $500M, with all funds secured in the U.S. I would like to take this opportunity to explain the financial aspects of this acquisition to you and make a recommendation concerning which of our alternatives should be used to finance the overseas investment.
The external financing used to fund our project refers primarily to financing obtained and provided to the business from banks, venture capitalists, and business angels. This financing can take the form of debt, equity, grants, or gifts. Debt in the form of a loan can be incurred through retail or commercial banks, including merchant banks. Equity generally consists of venture capital and money provided by business angels or merchant banks. Grants come from federal, state, and local government. And gifts can come from any benefactor or organization wishing to contribute to the project, usually an entity that supports Greenfield projects in general (ôExternal Financingö). However, funding can also occur through foreign credit and advance payments or commodity credits for financing of working capital (Krkoska).
Although we are open to all legitimate forms of financing for our project, this presentation will focus on the two most feasible alternatives: debt and venture capital. For financing our $500M project, we would need a long-term loan. This loan would cost us far more than the $500M we need, since we would be paying interest on it as well. Therefore it is a relatively expensive alternative. In addition, the loan issued to us would be secured against the companyÆs assets, and should the project fail for any reasonùa possibility we consider highly unlikely, by the wayùwe would lose the company to the lending institution. This risk must be given due consider
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