As is the case in the real world, you will need some source of capital to use both as working capital (to pay for materials and current expenses like salaries, utilities etc) as well as for investing (to upgrade assets). Select the “Financing” tab to setup your finance sources.
Normally, a savvy finance manager would try to finance working capital with short term debt and match investment capital with long term debt. However, depending on the risk profile of the finance manager, the decision of mixture of short and long term financing may vary.
Here, the short term debt is driven by the “Cash reserve level” which is the minimum cash at hand at the end of the round. If during the round closing process you are found to be short of cash, you will be advanced the proper amount to cover the shortages plus the amount you have set as minimum. However, if your available cash is more than the cash reserve level, you will not receive any short term loan.
Regarding long term borrowing, you may review your loan-book for individual loans you have received, when you received them, the amount received, the duration of the loan, the round that you will return the borrowed amount, the interest rate that you have agreed at the time of the loan agreement and the installment that you pay each round as interest. You may always get a new long term loan, which will be added to your loan-book.
The interest payed for each loan (both short and long term), depends on the current money market rates, your current rating which indicates your company's credibility and the length of the payback period. Be careful, because receiving a brave loan amount may destroy your credibility and minimize your loan taking ability in the future rounds, which may put you in financial distress, even drive you to default.
As an investor, you would expect to receive returns from healthy companies that you own. Cash surplus may be raised in the form of dividends. You can use this cash to either create new companies, or to fund other companies that you own, which may need your support to turnaround. There are limitations to the circumstances as well as the level of cash that you can raise. After requesting for dividends, cash dividends less taxes will be available in your cash account in two rounds.
Another financing option is a Capital Increase. Instead of borrowing from banks, you may use cash from your account to inject capital into your company. It might seem an attractive option, since by increasing capital using your cash, your company will not pay interest to banks. However, increasing capital destroys your company’s value, by inflating your balance sheet and reducing the earnings-per-share ratio.Back to Intro