Module 2 · Chapter 6

Money

A new company needs money before its first customer pays. This chapter shows how the owners lend it that money, when they can be asked for more, and when they are paid back.

≈ 11 min read 8-question test

In this chapter

  • Why the early money came in as loans, not as new shares
  • How a call for new shares works, and what it costs an owner who does not pay
  • When dividends start, and which numbers each owner receives

6.1Funding a joint venture in one paragraph

Owners can put more money into their company in two ways. They can buy new shares, which changes who owns what. Or they can lend, which leaves the shares as they are and brings the money back with interest.

Here, Ferris and A&W lent the company £1,800,000 to fit out its cold stores and trade through its first year. New shares are kept for an emergency, and only the two of them together can call for them. Dr Sayer never has to pay in anything more.

Key point

A loan does not change who owns what. New shares shrink the slice of every owner who does not buy them. So a minority owner usually prefers to lend.

Also in this chapter

  1. Why the early money came in as loans
  2. The shareholder loans
  3. New shares only in an emergency
  4. What dilution costs the owner who does not pay
  5. Dividends wait for the loans
  6. The numbers every veto needs
  7. Your job

Preview

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