Unit 4 Capital and Financial Markets Lesson 8 Business Financing Options

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2 Capital and Financial Markets Lesson 8: 1

3 Getting Started Lesson 8,, is the third lesson in Capital and Financial Markets, the fourth unit within the AOF Principles of Finance course. Lesson 8 provides students with an understanding of why businesses might need to raise capital and an overview of the numerous funding options available. Students explore strategies needed to grow a company s finances, including short-term and longterm funding, funding sources, and how funding decisions are made. This lesson will likely require 3 of the 11 class sessions planned for this unit. Getting Started This section includes: Objectives Prerequisites Major Topic Standard(s) Key Concept(s) Taught Key Vocabulary Key Skills Taught Habits of Mind Curricular Integration 2

4 Profit Getting Started Objectives Understand why businesses might need to raise capital Examine funding options available to businesses Prerequisites There are no prerequisites for students Major Topic What financing options are available for businesses? Standard(s) Apply writing skills to enhance financial career opportunities (States Career Clusters: Finance) Apply economic skills to enhance financial career opportunities (States Career Clusters: Finance) Use correct grammar, punctuation, and terminology to write and edit documents (States Career Clusters: Finance) Apply problem-solving and critical-thinking skills to resolve a problem (States Career Clusters: Finance) Exhibit personal skills needed to succeed in the workplace (States Career Clusters: Finance) Analyze and interpret financial data to produce accurate reports (States Career Clusters: Finance) Key Concept(s) Taught Financing Short-term funding needs Long-term funding needs 3

5 Getting Started 4

6 Getting Started Habits of Mind Persisting Thinking flexibly Striving for accuracy Questioning and posing problems Applying past knowledge to new situations Thinking and communicating with clarity and precision Curricular Integration Adjust their use of spoken, written, and visual language (e.g., conventions, style, vocabulary) to communicate effectively with a variety of audiences and for different purposes. (National Council of Teachers of English) Employ a wide range of strategies as they write and use different writing process elements appropriately to communicate with different audiences for a variety of purposes. (National Council of Teachers of English) 5

7 Materials and Resources Materials & Resources This section includes: Teacher Resources Student Resources Supplies Additional Resources Teacher Resources None Student Resources Student Resource 8.1, "Worksheet: Student Resource 8.2, "Worksheet: Funding ECPak s Needs" Supplies Board space (white or chalkboard) Sheets of poster board and supplies for making posters (glue, scissors, tape, etc.) Additional Resources Computers with Internet access 6

8 Assessment Assessment This section lists the student assessment products for this lesson and the criteria by which they should be assessed. Assessment Product Student Resource 8.1, "Worksheet: Student Resource 8.2, "Worksheet: Funding ECPak s Needs" Assessment Criteria Grid should be complete, and information throughout should be accurate. Worksheet responses should be complete; information throughout should be accurate. 7

9 Lesson Steps Lesson Steps Step Minutes Activity CLASS PERIOD Introduction: Understanding Sources of Business Capital Review with students that in the past few units, they have explored how businesses measure and manage their finances. Now, the focus will shift to how businesses increase their finances, or raise money. Explain that businesses typically need large infusions of money (called capital) for these three situations: Starting the business Expanding (growing) the business Maintaining the business during difficult times Some of the money businesses need can come from reinvesting company profits in the business. Most of the time, though, businesses acquire funds from outside sources. This unit examines a number of these financing options Research and Poster Activity: Exploring Business Financing After establishing an initial understanding of the reasons businesses require capital, explain to students that they will now work in small groups to explore possible ways businesses can secure capital. Each student team will explore two specific funding sources, and together they will develop a composite view of capital sources. 8

10 Lesson Steps Step Minutes Activity First, organize the class into nine groups. Next, distribute Student Worksheet 8.1,, and assign two of the financing options from the list below to each group. 1. Start-up financing 2. Equipment leasing 3. Community development financial institutions (CDFIs) 4. Microloans 5. Asset-based loans 6. Bank-term loans 7. SBA-guaranteed loans 8. Private loan guarantees loans 10. Royalty financing 11. Federal government venture capital 12. Angel investors 13. Business incubators (k) financing 15. Direct public offerings 16. Reverse merger 17. Initial public offerings (stock issuing) 18. Institutional venture capital 9

11 Lesson Steps Step Minutes Activity Then, explain to the groups that they are to research their two options and then organize the information they find using the relevant parts of the matrix in their worksheets. Explain, too, that when this information is organized on their worksheets, they should then transfer it to a poster for more formal presentation one that will be shared with their classmates during a gallery walk that will begin in the next class session. Give students time to use the Internet to research their financing options, emphasizing that they should compete their research during this class session. For their research, direct students to the following site: Encourage groups to begin work on their posters during this session as well. CLASS PERIOD Poster and Gallery Walk Activity: Sharing Business Financing (Continued) Give students time to complete their posters, and with perhaps 30 minutes of class time remaining, ask students to display the posters around the classroom. Next, distribute a copy of Student Resource 8.1, "Worksheet: Business 10

12 Lesson Steps Step Minutes Activity Financing to each student, and provide instructions for completing the rest of their worksheets, this time completing the matrix for each of the other financing types displayed on the posters, during the gallery walk. Have students begin their gallery walk and note taking, and explain that they will also have the next class period to conclude this activity. CLASS PERIOD Gallery Walk Activity: Reviewing Financing (Continued) Provide time for students to complete the gallery walk activity and note taking Discussion: and Financing Time Frames When class resumes, ask students to look back over their completed Student Resource 8.1. "Worksheet:. Encourage discussion by asking the following questions: Which options are used mainly to help new businesses get started? Which options are used mainly to help existing businesses grow? Which options are the most expensive? Why? Which options are the least expensive? Why? 11

13 Lesson Steps Step Minutes Activity Explain that financing options can also be categorized by time frame: those that help businesses in a pinch, providing financing to fund relatively short-term needs, and others that provide long-term funding solutions. Have students review their Financing Matrix and mark each option (in pencil) with an S if they believe it provides short-term financing or with an L if it provides long-term financing. When the students have completed their annotations, review the list and reach agreement on which items represent which type of funding. Conclude the session with a brief wrap-up of the lesson and explain to students that all that they ve learned about financing options during this lesson will be extended in the Lesson 9, Stocks. 12

14 Extending the Lesson Extending the Lesson This section indicates possible supports for students with special needs, as well as enrichment extensions for advanced students. Additional Student Supports Cooperative learning techniques will help students with special needs succeed through peer teaching and division tasks and responsibilities. Enrichment Extensions Suggest that students interview local entrepreneurs to identify which business financing strategies they use for their company. 13