#alternate alternate GigaOM » Where Does Google Get 97% of Its Revenue? Comments Feed GigaOM HP Buys IBRIX to Keep Up With Storage Trends Verizon's Handset Concessions Target AT&T, iPhone GigaOM WordPress.com GigaOM * Events * GigaOM.tv * Research * Home * Apple * Broadband * Cleantech * Cloud * Collaboration * Mobile * Video KevinCTofel: Shazam and Spotify Shackup — U.S. Spotify Launch Playing Next? http://t.co/qRGCT6x Why add a feature in 6 countries when your app is in 150? _______________ Search Where Does Google Get 97% of Its Revenue? By Jordan Golson Jul. 17, 2009, 7:30am PDT 28 Comments * Tweet * IFRAME: http://www.facebook.com/plugins/like.php?href=http%3A%2F%2Fgigaom.com%2F2009%2F07%2F17%2Fwhere-does-google-get-97-of-its-revenue%2F&layout=&show_faces=false&width=450&action=like&font=arial&colorscheme=light&height=35 googleadrev Ask your friends what business Google is in and the answer you’ll most likely get is “search.” And they would be wrong. Google is, first and foremost, an advertising company. A full 97 percent of its revenue comes from advertising on its various properties, including YouTube, plus partner sites through its AdSense product. Sure, Google has Android and Chrome OS and everything else, but it doesn’t make money from them — they’re just there to get people to watch more ads. Do you like this story? * IFRAME: http://www.facebook.com/plugins/like.php?href=http%3A%2F%2Fgigaom.com%2F2009%2F07%2F17%2Fwhere-does-google-get-97-of-its-revenue%2F&layout=&show_faces=false&width=450&action=like&font=arial&colorscheme=light&height=35 * Tweet Google Google Previous HP Buys IBRIX to Keep Up With Storage Trends Next Verizon's Handset Concessions Target AT&T, iPhone GigaOM Research 5 Connected Consumer Companies to Watch in 2011 Michael Wolf in Connected Consumer How Media Companies can Compete Online Mathew Ingram in NewNet Why Greentech Money is Sliding from Supply Side to Demand Side Jeff St. John in Green IT 28 Comments Subscribe to comments Click here to cancel reply. Name ______________________ Email ______________________ Site ______________________ Connect with WordPress.com Comment ________________________________________ ________________________________________ ________________________________________ ________________________________________ ________________________________________ ________________________________________ ________________________________________ ________________________________________ Post comment [_] Notify me of follow-up comments via email. 1. Reply Satish Friday, July 17 2009 Very easy chart for the accounting folk to plot :-) + Reply Cheese Sunday, July 19 2009 Yes, Taj Mahal is a white building and Google makes money from ads. I would expect GigaOM to go beyond the obvious – in this case, to give a breakdown of the 97% – what properties of Google contribute to this 97%? How much does google.com bring in vs google sites per country? How much does youtube bring in, and how much does Ad Sense? What about other google sites (scholar, docs, picassa…)? 2. Reply f2point8 Friday, July 17 2009 Similar question: What business is television in? If you answered, “entertainment” you’re wrong. 3. Reply satish sharma Friday, July 17 2009 This is truly an absurd conclusion. Such conclusions have no no place in this blog — maybe on a tabloid. It’s akin to saying banks don’t make money by charging interest but only by issuing bonds or credit cards. Most of the advertising is on the keywords; “search” is the method by which it is monetized. If you ever search anything in google — you an see the paid advertisements on top and right hand panel. Pray tell why would I see this unless I searched for something in the first place. There is another method of keyword advertising that’s placing related keyword ad’s on websites. That too is only money maker for search reasons — otherwise why would you, as a website owner, accept “rival” ads. + Reply les madras Friday, July 17 2009 indeed. the author barely knows his elbow from his ass… 4. Reply Rich Friday, July 17 2009 Same could be said of GigaOM. Right? So is Google GigaOM and visa versa? or is GigaOm an extension of Google. The interperative arm of Google? Hey I don’t see you name on the Editorial Masthead…what’s up with that? + Reply Jordan Golson Friday, July 17 2009 Ah, but GigaOm (and TechCrunch, and VentureBeat) also make money from conferences and subscription services and the like. Magazines make money from ads, but also from subscribers and single-copy sales. Same with newspapers. Google makes almost all it’s money from ads — not from Gmail, Android or the Chrome OS. + Reply Jordan Golson Friday, July 17 2009 As for the masthead, you’d have to ask Om about that. :-) 5. Reply Martin Friday, July 17 2009 and that 97% which is advertising is derived from search terms. So what on earth are you talking about? + Reply Rockstar Sid Saturday, July 18 2009 Now that’s a valid point. I agree with Martin.. 6. Reply Anthony Wang Friday, July 17 2009 it might not be 100% clear, but I think the point is that Google is an advertising company, not a software company – people think of the search engine as the product, but our searches and clicks really are http://anthonywang.com/2009/07/16/you-are-googles-product/ 7. Reply chris Friday, July 17 2009 Friend: ” Most of Google’s revenue comes from search.” Reader: “No, your wrong, revenues come from “Search Advertising.” (say advertising slowly) Friend: “Oh, you’re really smart. That changes everything.” 8. Reply Chris Dean Friday, July 17 2009 -1 Only for the most naive definition of business. The NY Times is in not in the journalism business because it derives the majority of revenues from ads? That’s just ridiculous. The Times is in the journalism business and Google is the research business. The only reason I buy the Times (and thereby read the ads) is because of the great reporting. Same with teh google. This is an attention getting story not worthy of gigaom. 9. Reply Shahab Khan Friday, July 17 2009 I thought that revenue for google through search would be on top..Anyway this is nice interesting fact! 10. Reply Vipin Friday, July 17 2009 I failed to understand what is the meaning of this post. Is it a news or surprise for author. 11. Reply CJ Millisock Friday, July 17 2009 This article is bunk. Just because Google gets 97% of its revenue from advertising, it doesn’t mean Google is an advertising company. A company isn’t necessarily defined by its monetization strategy. + Reply Anthony Wang Friday, July 17 2009 Google might be a search/software company, but it’s an advertising *business* – a business is an entity that exists to make money, and ads are how Google makes money (well, 97% of it) the company (people and projects) makes software, but it wouldn’t exist in its current form without the ad business (monetization) – it would still be a grad school project running out of the Stanford CS lab 12. Reply su2lly Friday, July 17 2009 Wow. Here’s another fact. Did you know that 100% of the person who made this chart is a Giant D Nozzle? I’m always amazed at those who complain about a company that gives things away for free. 13. Reply Libran Lover Friday, July 17 2009 VERY informative article! Especially for Gigaom’s tech-savvy readers who had no idea of this SHOCKING fact! The chart made it EXTREMELY EASY for me to understand the complex economical concepts lucidly explained in the article. Will read again. A+++++ 14. Reply James Saturday, July 18 2009 Did you know that GigaOM is not a blog? Sure they post a lot of poorly-thought-out blog posts, but they don’t make any money off them. They just post silly pie charts in order to get you to see more banner ads. 15. Reply Anand Sunday, July 19 2009 Om should fire you for this jackass post of yours.. 16. Reply StareClips.com Sunday, July 19 2009 The big debate, really, is what constitute “the business” that someone is in. If someone makes lemonade and sells it, then it’s pretty safe to say they are in the business of making lemonade. However, if someone makes lemonade, goes to local businesses and offers to place advertising on the cups and this exchange of money helps the person to give lemonade away for free, then what business are they in? The business of making lemonade or the business of providing advertising? To understand this, you need to break it down into two parts. 1) What benefit is the company providing to consumers? 2) What service is the direct result of the exchange of money? In the case of a simple lemonade stand, the benefit to the consumers is a nice refreshment… the service which results in the exchange of money is simply providing this lemonade to the consumer. In the second example, the second part has changed… the exchange of money is the direct result of advertising on the lemonade cups. Given this, Google provides various different services to consumers. In turn, they gets lots and lots of traffic. They then monetize this traffic using ads. So, the benefit they are providing to consumers is the organization of information. The service provided resulting in the exchange of money is advertising. So, yes… Google IS in the advertising business. However, this only makes sense if you’ve got money in your hands and you’re looking to advertise. If, however, you have information you are looking to organize, then Google is in the business of organizing the world’s information. 17. Reply Charmaine Lim Monday, July 27 2009 Yes, Google is an advertising company and one of it’s source of revenue comes from AdSense products. 18. Reply Arnold Wednesday, October 28 2009 I agree with Anand, and I would go a bit further by asserting that one is not in the business of making or offering something; one is in the business of *selling* something. To Anand’s point, Google would be in the search business only if you as the search “customer” paid Google to access search results. This isn’t to say that search isn’t central to Google’s genetic makeup as a company. Rather, search is one of the strategic core competencies that supports, enables, and drives Google’s advertising business by connecting advertisers with potential customers. As Charmaine points out, search-based advertising is only one of several channels through which Google monetizes on advertisements (albeit presumably the dominant one). AdSense, for example, has nothing to do with search, and everything to do with driving advertising revenue. 19. Reply Carlos Guevara Saturday, January 23 2010 So natural they steel publishers efforts Recently Google Adsense adopt a new price policy invoked by the world economy crises while taking the same revenues from advertisers they give less to publishers . so if you a website or blog and you have lets say 100 clicks a day which was yield 10 US$ for you you now get 2 US$ So great Google like Shylock in merchant of venice. 20. Reply StareClips.com Saturday, January 23 2010 @Carlos Guevara, It’s very easy to misinterpret things when you don’t understand business. Google has a number of different competitors in the market. Microsoft Bing being a big one. Yahoo being another, of which Microsoft acquired control. There are also a number of fly-by-night advertisers cropping up left and right, because this is where the money is at. So, if you use Google as an advertiser and think they are giving you an unfair cut of the money, all you need to do is go to a competitor. If you don’t think there are any viable competitors, just acquire direct advertisers yourself. It was possible before Google and is still possible today. The real reason Google is so successful is because the competition aren’t giving terms which are much better. So, the one giving the best service is going to naturally rise to the top. Google is that clear winner (so far). On a side note, this article is still a bit misleading. Saying that Google isn’t in the search business and is, instead, in the advertising business is a misnomer. It would be like saying Time Magazine is not in the magazine business but in the advertising business. And that NBC is not in the entertainment business but in the advertising business. Just because a business makes the bulk of their income FROM advertising… does not mean they are only in the “advertising business”. Otherwise, you could say your local grocery store is in the advertising business because they “advertise third-party products on their store shelves.” The fact of the matter is… if Google’s search engine vanished, they would lose a majority of their money. While they do make most of their money through advertising, that advertising is featured primarily on their search engine. Thus, their search engine is the mainstay of their business. They have two ways of doing business as a search engine. Charge everyone money for using the search engine and make it ad-free… or, put up ads and provide free search to everyone. I think the latter model is a win-win for everyone because it gives advertisers an avenue for getting attention and it gives consumers a free service. To somehow think this is a bad thing is just someone trying to get more blog hits. A blog which, no doubt, features advertising. A blog which probably earns most of its income from advertising. A blog which might not consider itself to be in the blogging business, but the advertising business, perhaps? 21. Reply Anon Wednesday, September 29 2010 How much goes Google make in Ads on the search results page vs on Ads on other peoples pages and mobile apps and etc. 22. Reply Roger Tuesday, January 4 2011 Well google also makes money by buying and selling websites. 22 Trackbacks 1. Digitale medier, koncepter & samfundet som sådan – Google er én stor reklame July 17, 2009Tracked on [...] faldende CPC priser. Træerne vokser altså heller ikke her ind i himlen. Og for det andet kommer 97% af indtægterne stadig fra annoncer – annoncer som ikke ret mange af brugerne vel reelt set har bedt om endsige synes [...] 2. Ohio drops 2 standardized tests to save money - Coshocton Tribune | How To Create Passive Internet Income July 17, 2009Tracked on [...] Where Does Google Get 97% of Its Revenue? – Gigaom.comAsk your friends what business Google is in and the answer you’ll most likely get is “search.” And they would be wrong. Google is, first and foremost, an advertising company. A full 97 percent of its revenue comes from advertising on its [...] 3. Google 97% 的收入都来自于广告 | 谷奥——探寻谷歌的奥秘 July 17, 2009Tracked on [...] GIGA OM 本站文章除注明转载外，均为本站原创编译 [...] 4. Where Does Google Get 97% of Its Revenue? « Quasi.dot July 17, 2009Tracked on [...] doesn’t make money from them — they’re just there to get people to watch more ads.Where Does Google Get 97% of Its Revenue? linkscolor = "000000"; highlightscolor = "888888"; backgroundcolor = "FFFFFF"; channel = [...] 5. Hot Links: Goodbye Walter Cronkite « The Reformed Broker July 18, 2009Tracked on [...] A pie chart of how Google makes it’s money, 97% in one slice. (GigaOM) [...] 6. Von wegen Suche: Womit Google wirklich Geld verdient | freshzweinull +++ July 18, 2009Tracked on [...] aus dem Geschäft mit Lizenzen für Suchalgorithmen sind verschwindend gering. Nur etwas mehr als 3 Prozent nämlich: 187 Millionen der 5,52 Milliarden Dollar Umsatz macht Google demnach mit Lizenzierungen [...] 7. Webhamer Weblog: Search & ICT-related blogging » links for 2009-07-18 July 18, 2009Tracked on [...] Where Does Google Get 97% of Its Revenue? Ask your friends what business Google is in and the answer you’ll most likely get is “search.” And they would be wrong. Google is, first and foremost, an advertising company. A full 97 percent of its revenue comes from advertising on its various properties, including YouTube, plus partner sites through its AdSense product. Sure, Google has Android and Chrome OS and everything else, but it doesn’t make money from them — they’re just there to get people to watch more ads. (tags: google marketing) [...] 8. Tech News » The Power of Opaque Selling July 19, 2009Tracked on [...] Where Does Google Get 97% of Its Revenue? [...] 9. Tech News » Apollo 11 Moon Landing: A YouTube Timeline July 19, 2009Tracked on [...] Where Does Google Get 97% of Its Revenue? [...] 10. Tech News » YouTube Experimenting With 3D Web Videos July 20, 2009Tracked on [...] Where Does Google Get 97% of Its Revenue? [...] 11. Google Vs Amazon, Microsoft « Kindle Review – Kindle 2 Review, Books July 22, 2009Tracked on [...] of Google’s money (or to be more particular, 97% of it) comes from [...] 12. SnapDragon Consultants » Google is finally ready for the big time (Part 2) August 7, 2009Tracked on [...] An explanation of the campaign from the official Google blog: Over 1.75 million businesses, schools and organizations have gone Google — including Motorola, University of Notre Dame, the Mercy Corps and many more — and each day, 3,000 more organizations join them. We want every organization to understand the benefits of going Google, so today we’re telling the story in a new way. We’re kicking off a series of outdoor billboards in four cities — Boston, Chicago, New York and San Francisco — that will change every weekday for the next four weeks. The billboards tell the story of an anonymous IT manager who gets so fed up with the typical IT status quo that his company eventually — you guessed it — goes Google. [Via GigaOM] [...] 13. » OMG Google Sells Ads ¶ ShitCrunch August 13, 2009Tracked on [...] the Most Insightful Post of the Week award goes to Jordan Golson for telling the world that Google makes most of it’s money by selling advertising. The popular GigaOm writer has [...] 14. Biz Beat » Blog Archive » Eric Schmidt, Google CEO and Chairman September 15, 2009Tracked on [...] they offer their users – like their web search engine, Gmail, Google apps, Google maps, etc. They make 97% of their revenue from their advertising divisions AdWords and AdSense. In 2006, Google acquired YouTube and in 2008, they acquired the [...] 15. Is Google Cooking-up Something? – IT-Zeen October 6, 2009Tracked on [...] that was before and the battles were not fought for Google’s core business — search and advertising revenue that it produces. It seems that recently though, everyone took turns in taking a swing at Google. [...] 16. Google & AdMob: Is that It? | Volker on Mobile November 13, 2009Tracked on [...] eyeballs bit is, however, maybe the concerning piece of this: Google makes 97% of its revenues from its legacy business using AdSense, AdWords, etc. Nothing much has changed for a couple of [...] 17. Google is Evil When it Comes to Innovation « Marc's Augmented Reality December 8, 2009Tracked on [...] starts with the immense revenue generated by advertising. According to Jordan Golson of GigaOm “97 percent of its revenue comes from advertising on its various properties, including [...] 18. Google IS Evil When it Comes to Innovation | Marc's Augmented Reality December 14, 2009Tracked on [...] starts with the immense revenue generated by advertising. According to Jordan Golson of GigaOm “97 percent of its revenue comes from advertising on its various properties, including [...] 19. The Future of Twitter « Vicarious Existence April 15, 2010Tracked on [...] you go, “Psshaw!” and dismiss the entire concept, remember that Google gets 97% of its revenue from advertising – you know, those AdWord thingies - and it is the biggest advertising agency in the world [...] 20. Bing To Destroy Google With Free Adwords | Services For Seo April 24, 2010Tracked on [...] it’s all about the ads, if 97% of Google’s revenue comes from advertising, then the target is advertising, not search, and the tactic is [...] 21. McAdam as Verizon COO: More Google, Less Neutrality: Tech News « September 20, 2010Tracked on [...] wants the world to use it as a search engine and suite of web apps to beget ad income, which last year accounted for 97 percent of revenue. Verizon will be moving towards a tiered pricing bucket for wireless data and is even offering [...] 22. How Google benefits from the long tail of search advertising (PPC) | Online Marketing Blog | Digital Marketing Blog January 11, 2011Tracked on [...] Jens on July 16, 2010 It is well documented that 97% of Google’s profit comes from ads. Although they do have a lot of product offerings; Chrome, Gmail, Wave, Google Docs [...] Sign up to get GigaOM news! ____________________ Subscribe IFRAME: http://www.facebook.com/plugins/like.php?href=http%3A%2F%2Fwww.facebook.com%2Fpages%2FGigaOM%2F95493077268&layout=button_count&show_faces=true&width=90px&action=like&colorscheme=light&height=21 * Twitter * Facebook * RSS Most Recent 1. Shazam and Spotify Shackup — U.S. Spotify Launch Playing Next? 2. 3 Connected-Consumer Companies to Watch in 2011 3. Android Leaves iOS Behind in Millennial Ad Impressions 4. Late Surge On Internet Deals Heat Up VC Funding 5. Icelandic MP Says It’s Our Duty to Fight For WikiLeaks GIGAOM TV Featured Video Green Overdrive: Tesla & Toyota's EV RAV4! 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[gigaom-pro-logo.gif?m=1286124532g] News From * Citigroup, DragonWave: After-Hours Trading * Microsoft Fights Apple's App Store Trademark * Solar Winners: Jinko Solar, ReneSola * Solar Losers: Evergreen Solar U.S. Plant Shuttered Partner Center Upcoming Event [big-data-2010d.gif] Across the Network * Broadband Virgin Mobile Unlimited Plan Not So Unlimited Anymore * Open Source It's Official: Ubuntu Will Embrace the Cloud--Flexibly * Apple Screencast: How to Set Your Photoshop Scratch Disk * Cleantech Is Solar Thin Film Profitable? 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Some Background Some Background * The Numbers + What are the federal government's sources of revenue? + How does the federal government spend its money? + What is the breakdown of tax revenues between federal, state, and local governments? + How do U.S. taxes compare internationally? * Budget Process + How does it work? + What is the history? + What is the schedule? + What is reconciliation? + How is it enforced? + What is PAYGO? * Taxes and the Budget + What is the short-term budget scenario? + What is the long-term budget scenario? + How accurate are short-run and long-run budget scenarios? + How much spending is uncontrollable? + What is generational accounting? + What are extenders? + What does it mean for a government program to be off-budget? + Are Social Security trust funds real? * Taxes and the Economy * Economic Stimulus + What is the Economic Stimulus Act of 2008? + What does the 2008 stimulus act do for individuals? + What does the 2008 stimulus act do for businesses? + How does American Recovery and Reinvestment Act of 2009 change the tax code? + What does the American Recovery and Reinvestment Act do for individuals? + What does the American Recovery and Reinvestment Act do for businesses? + What is the role of monetary policy? + How do automatic stabilizers work? + When is fiscal stimulus appropriate? + What characteristics make fiscal stimulus most effective? + What fiscal stimulus options would be most effective? + What fiscal stimulus options would have questionable effectiveness? + What fiscal stimulus options should be avoided? * Distribution of Tax Burdens + Are federal taxes progressive? + How should progressivity be measured? * Income Tax Issues + How do the standard and itemized deductions compare? + What's the difference between tax deductions and tax credits? + How do phaseouts of tax benefits affect taxpayers? * Tax Expenditures + What are tax expenditures and how are they structured? + What is a tax expenditure budget? + Why are they controversial? + How have they changed over time? + What are the largest tax expenditures? * Tax Gap + What is the Tax Gap? + What is being done now to close the gap? + Can much of it be closed? * Tax Shelters * Bush Tax Cuts: Description + How did they change the tax code? + How did the 2001 tax cuts change the tax code? + How did the 2002 tax cuts change the tax code? + How did the 2003 tax cuts change the tax code? + How did the 2004 tax cuts change the tax code? + How did the 2005 tax cuts change the tax code? + How did the 2006 tax cuts change the tax code? * Bush Tax Cuts: Beneficiaries + If we ignore how the cuts are paid for, who benefits from the Tax Cuts? + If we account for how the cuts are paid for, who benefits from the tax cuts? + Who benefits when their cost and potential economic growth are accounted for? + How are the distributional effects measured? * Bush Tax Cuts: Fiscal Effects + How have they affected tax revenue? + How big are the cuts? + How do they compare with the Reagan cuts? + Did they reduce the size of government? + Are they justified as part of a "starve the beast" strategy? + Are tax cuts an effective way to reduce government spending? + How do the AMT and interest payments affect the cost? + What is their impact on government borrowing and interest payments? + What spending and revenue measures would pay for making them permanent? * Bush Tax Cuts: Economic Effects + How did they affect corporate investment? + How did they affect small businesses and entrepreneurs? + How did they affect incentives to work? + How did they affect retirement saving? + Were they well designed to strengthen long-term economic growth? + Were they well timed to spur economic growth? + What are the indirect effects on economic growth? + Did they provide good "bang for the buck"? + Didn't they help the economy recover from the 2001 recession? Key Elements of the US Tax System Key Elements of the US Tax System * Taxation and the Family + What is the personal exemption? + Has the personal exemption kept up with prices and incomes? + What is the Child Tax Credit (CTC)? + What is the Earned Income Tax Credit (EITC)? + How does the tax system subsidize child care expenses? + What tax incentives exist to help families save for college? + What tax incentives exist to help families pay for college? + What are marriage penalties and bonuses? * Taxes and the Poor + How does the federal tax system affect low-income households? + What is the difference between refundable and nonrefundable credits? + Can poor families benefit from the child tax credit? + Why do low-income families use paid tax preparers? * Savings and Retirement + What kinds of tax-favored accounts are there? + How large are the tax expenditures for retirement saving? + What are defined benefit retirement plans? + Who uses tax-favored retirement savings accounts? + What are defined contribution retirement plans? + What types of non-employer-sponsored accounts are available? + How does tax-favored retirement saving affect national saving? + Where does the tax saving come from? + What is an automatic 401(k)? + How might saving be encouraged for low- and middle-income households? * Individual AMT + What is the AMT? + Who pays the AMT? + How much revenue does the AMT raise? + What is the effect of the 2001-2006 Tax Cuts on the AMT? + What is the effect of the AMT on the 2001-2006 tax cuts? + What has been the effect of annual "patches?" + Should it replace the regular income tax? * Health Insurance/Health Care + How much does the federal government spend on health care? + Who has health insurance coverage? + How does the tax exclusion for employer-sponsored health insurance work? + How does the employer-sponsored insurance exclusion affect health insurance coverage? * Homeownership + What are the tax benefits? + Do existing tax incentives increase homeownership? + How could the tax incentives be improved? * Education + What tax incentives exist to help families save for college? + What tax incentives exist to help families pay for college? * Capital Gains and Dividends + How are capital gains taxed? + What is the effect of a lower tax rate? * Wealth Transfer Taxes + How do the estate, gift, and generation-skipping transfer taxes work? + Who pays the estate tax? + How many people pay the estate tax? + What did Economic Growth and Tax Relief Reconciliation Act (EGTRRA) do to the estate, gift, and generation skipping transfer taxes? + How could we reform the estate tax? + What is an inheritance tax? * Taxes and Energy + What tax incentives encourage energy production? * Taxes and the Environment + What are green taxes? + What green taxes does the United States impose? + What green taxes do European countries impose? * Business Taxation + How does the corporate income tax work? + What are flow-through enterprises and how are they taxed? + What is carried interest and how should it be taxed? + What are the options for reforming the taxation of carried interest? + What are statutory and effective corporate tax rates? * Tax Incentives for Economic Development + What are tax incentives for economic development? + What tax incentives promote the economic development of low-income communities? + What is the Low-Income Housing Tax Credit? + What tax incentives were created in response to 9/11? + What tax incentives were created in response to Hurricanes Katrina, Rita and Wilma? * Tax-exempt Organizations + How are charitable contributions treated? + Which entities are exempt? + Who benefits from charitable deductions? + How could incentives for charitable giving be improved? * International Tax System + How does the current system of international taxation work? + What are the consequences of the U.S. International Tax System? + How does the tax system impact U.S. competitiveness? + How would formulary apportionment work? + What are the options for reform? How Could We Improve the Federal Tax System? How Could We Improve the Federal Tax System? * Incremental Reforms + What are ten ways to simplify the tax system? + How might saving be encouraged for low- and middle-income households? + How could the tax incentives for homeownership be improved? + How could we reform the estate tax? + What are the options for reforming international taxation? * Revenue-raising Options * Tax Simplification + Why are taxes so complicated? + How costly is complexity? + What are the benefits of simpler taxes? + What policy reforms could simplify the tax code? * National Retail Sales Tax: Description + What is it? + What would and would not be taxed? + What would the tax rate be? + Why wouldn't the rate be 23 percent? + What is the difference between a tax-exclusive and a tax-inclusive sales tax rate? * National Retail Sales Tax: Issues and Concerns + Who bears the burden? + How much avoidance and evasion would there be? + What would be the effect on economic growth? + What transition rules would be needed? + Would it simplify the tax code? + What did the President's Advisory Panel on Tax Reform say? + What has been the state and local experience? + What is the experience of other countries? * Return-Free Filing + What is it and how would it work? + What are the benefits? + What are the drawbacks? + How would the tax system need to change? + Who would qualify? + Would it raise taxes? + What was the experience in California? + What other countries use it? The State of State (and Local) Tax Policy The State of State (and Local) Tax Policy * State and Local Revenues + What are the sources of revenue for state governments? + What are the sources of revenue for local governments? + How have the sources of revenue for state and local government changed over time? * Specific State and Local Taxes + How do state and local income taxes work? + How do state and local sales taxes work? + How do property taxes work? * Fiscal Institutions and Intergovernmental Relations + How does the deduction for state and local taxes work? + What are rainy day funds and how do they work? + What are tax and expenditure limits? * Mortgage Crisis + What is the mortgage crisis? + How has the federal government responded? + What is the Housing Assistance Tax Act of 2008? + How have state legislatures responded? + What financial assistance have states provided? + What non-financial assistance have states provided? Glossary Appendix: TPC's Greatest Tables Need Help? Email Us Tax Policy Center border Entry 1 of 4 Print This Page Print This Chapter The Numbers: What are the federal government’s sources of revenue? Individual income taxes and payroll taxes now account for four out of every five federal revenue dollars. Corporate income taxes contribute another 12 percent. Excise taxes, estate and gift taxes, customs duties, and miscellaneous receipts (earnings of the Federal Reserve System and various fees and charges) make up the balance. The composition of tax revenue has changed markedly over the past half century, with payroll taxes contributing an increasing, and corporate income and excise taxes a decreasing, share of the total, but the share provided by individual income taxes has remained roughly constant. Numbers_Figure-1_What-are-fed-govts-sources-of-revenue Underlying Data: Download Numbers_Figure 1_What are fed govt sources of revenue_high * In 2008 the federal government collected $2.5 trillion, an amount equal to 17.7 percent of GDP. Federal revenue has ranged from 14.4 to 20.9 percent of GDP over the past five decades, averaging 18.2 percent. * The individual income tax has been the largest single source of federal revenue since 1950, averaging just over 8 percent of GDP. * Payroll taxes swelled following the creation of Medicare in 1965. Taxes for Medicare, combined with periodic increases in Social Security taxes, caused payroll tax revenue to grow from 1.6 percent of GDP in 1950 to more than 6 percent since 1990. Payroll taxes also include railroad retirement, unemployment insurance, and federal workers’ pension contributions. * Revenue from the corporate income tax fell from between 5 and 6 percent of GDP in the early 1950s to 2.1 percent of GDP in 2008. * Excise taxes fell steadily throughout the same period, from nearly 3 percent of GDP in 1950 to 0.5 percent in recent years. * The remaining sources of revenue have fluctuated less, together claiming between 0.5 and 1.0 percent of GDP since 1950 and standing near the bottom of that range in 2008. * Numbers_Figure-2_What-are-federal-govt-sources-of-revenue Underlying Data: Download Numbers_figure 2_What are federal govt sources of revenue_high * Changes in the shares of the various taxes in total federal revenue reflect these historical shifts. The individual income tax has consistently provided nearly half of total federal revenue since 1950, while other revenue sources have waxed and waned. Excise taxes brought in 19 percent of total revenue in 1950 but only about 3 percent in recent years. The share of revenue coming from the corporate income tax dropped from about one-third in the early 1950s to less than one-sixth in 2008. In contrast, payroll taxes provided more than one-third of revenue in 2008, compared with just one-tenth in the early 1950s. See Also The Numbers: How does the federal government spend its money? The Numbers: What is the breakdown of tax revenues between federal, state, and local governments? The Numbers: How do U.S. taxes compare internationally? Data Sources Budget of the United States Government, Fiscal Year 2008, Historical Tables, Table 2.1 Receipts by Source: 1934-2012 Congressional Budget Office, A Preliminary Analysis of the President's Budget and an Update of CBO's Budget and Economic Outlook, March 2009, Tables F-3 and F-4 Historical Amount of Revenue by Source, 1934-2013 Historical Percentage of Revenue by Source, 1934-2013 Historical Source of Revenue as Share of GDP, 1934-2013 Further Reading U.S. Congress Joint Committee on Taxation, “Selected Data Related to the Federal Tax System,” JCX-11-07, March 14, 2007. Author: Roberton Williams Last Updated: April 22, 2009 border Entry 1 of 4 Print This Page © Urban Institute, Brookings Institution, and individual authors, 2010. Site Map | Privacy Policy | Support TPC | Contact Us free article :: tutorial * Home * Submit articles * Contact * Free content Sources of Capital written by: George Tuckson; article published: year 2006, month 12; In: Root » Legal and finance » Market and Finances » Sources of Capital Share | [translate.png] PL | NL | FR | ES | PT | IT | DE | DK | NO | SE | FI | GR | JP | CN | KR | RU | AE Sources of Capital Report this article More information Capital employed and invested capital Working and Nonoperating working capital What is the purpose of consolidated accounts How financial analysts should treat goodwill Deferred tax assets and liabilities What are inventories and items included Operating leases are not capitalised and are treated as rentals How to perform a financial analysis A market is not an economic sector The competion and production The fundamental concept of cash flow from operating activities The functions of a financial system and debts Only A Fool Breaks The 10 Pip Rule HOW TO UTILISE EXCHANGE RATE CONVERTERS Questions to answer if you are Having Financial Problems What to do in case of Bank Failure PROTECTING AGAINST THE FAILURE OF A FINANCIAL INSTITUTION Free forums Several relevant sources of capital are available to a startup in order to meet the company's needs in its various phases. Sources of financing are classified primarily into equity (usually in the form of shares), which is capital invested in the company in consideration for part of the ownership and debt. Many financial instruments are constructed from a combination of the two, such as convertible debentures, which combine debt and options for equity. There is a direct link between perceived risks and required returns; the risk, the higher is the rate of return expected by investors. The risk incorporated in receiving equity in consideration for an investment is higher than the risk involved in debt (debentures), since shareholders receive only the residual claim, whereas debenture holders have a superior, contractual claim to principal and interest. The younger the company, the greater is the resemblance of any debt it issues to equity, since its debt offers no much better security for a return on the investment. This section describes the various sources from which startups may obtain financing in the various stages of their development. The first sources will generally tend to invest in the company's equity. In practice, the securities which investors in startups receive are usually preferred shares that are convertible into ordinary shares. The main sources of finance which are available to startups are venture capital funds, various institutional investors such as pension funds and insurance companies, and private investors (high net-worth individuals, also referred to as "angels") who operate alone or together with others through investors' clubs and companies. The investments are made in three ways: directly in the startup; through entities which provide added value, such as venture capital funds which screen potential investments, make and manage them, and assist in managing the money of investors of different types; and funds of funds, which assist institutional investors in screening and dispersing investments among several venture capital funds. Obviously, public capital markets (particularly investors on stock markets) are another important source of financing for startups--both directly, by public offerings on stock exchanges, and indirectly, by investments in various investment funds. Family and Friends This is the first source of financing sought by most entrepreneurs after using their own funds. Investing personal funds or the funds of family and friends also serves as a signal to outside investors that the entrepreneur places great faith in the company. Private Investors (Angels) Private investors, also referred to as angels because of their concern for faithful but penniless entrepreneurs, are a common source of preliminary financing. A typical angel is a person who is familiar with the industry (such as an entrepreneur who "made it") and who contributes to the company not only money, but also added value and connections. There now remains only a vague distinction between an angel and a mere private financial investor. Angels invest in startups in their early phases with the hope of receiving a high rate of return due to the high risk involved in the investment. In the last decade, many angel clubs have developed which bring together several angels to assess opportunities for investments and to aggregate the amounts of money required for them, thereby making the investment more efficient. Seed and pre-seed investments are available both from individual angels and from angel associations. These investors typically allocate $10,000-200,000 per project, which are invested in the early phases of companies. There are considerable differences among different angels: Some are merely financial investors who are at times entirely unfamiliar with the startup's line of business, and some have vast experience in the company's specific field of activity. In the United States, angel investors contribute more than $15 billion per year to startups. Information on angels may be obtained from other entrepreneurs, from attorneys and CPAs, and from Web sites which provide information on sources of financing. Angel associations may also be contacted for this purpose. Venture Capital Funds In order to finance ventures after their initial establishment, entrepreneurs usually turn to bodies which specialize in high-risk investments. Venture capital funds concentrate capital which is designated for risky investments and provide their investors with investment-screening services in consideration for part of the profit they generate for them. Many venture capital funds now invest in companies in their early phases. Some of the funds also provide added value services similar to those offered by incubators. Nevertheless, it should be kept in mind that the investment process of venture capital funds is generally very long, and funds prefer to invest only after the business and technological models are clarified. Therefore, funds may prove a good source for seed financing, but not for pre-seed financing. Moreover, funds which declare themselves to be "seed investors" are not always capable of providing an infant company with the type of intimate support it requires. Corporate Investors Corporate investors have supported the development of business ventures long before the first venture capital funds were created. Even now, following the development of the venture capital fund, a substantial part of the investments in companies is made by corporate investors (either directly or by investing in funds). The investments are made in the development of new ventures inside the company or in new companies that develop promising technologies which complement the investing company's business. Some of the investments culminate in the acquisition of the company. Most of the direct investments made by corporate investors are not limited to mere capital, and are aimed at a strategic cooperation in the development of technologies and the acquisition of know-how or in the distribution of a product. This cooperation is often accompanied by the acquisition of 5-20% of the new venture, a level which does not require the investing company to report the investment using the equity method. Strategic cooperation can help new companies introduce their product to the market quickly. The position held by the strategic partner in the target market and its marketing channels can complement the technological know-how of the venture. On the other hand, caution should be exercised in the face of strategic partners who are more interested in gaining access to the technology than in seeing the company succeed by itself. In certain extreme cases, such partners would rather bury the technology than support its development in order to prevent competition with their own technology. Ties with a single strategic partner can also block opportunities for contacts with other players in the market. In conclusion, cooperating with market leaders can bestow many advantages, but these advantages also entail many risks, and the partner's intentions and character should be carefully scrutinized before any technology is exposed to these potential partners. In addition, it is best to avoid giving the partner advantages over other potential competitors in the acquisition of the company, in case this issue becomes relevant (some companies condition their investment on clauses such as a right of first refusal to buy the company or a priority in the negotiations), to avoid shutting the door on future opportunities. Other Venture Capitalists In recent years, investment banks and many institutional entities have started participating in investment rounds, usually together with funds, and their readiness to join relatively early rounds has increased over the years (although most of the direct investments are still made in the later stages). Institutional investors seek opportunities to invest in companies which could provide them with a higher rate of return than that offered by the rest of the market. The phenomenon has become so prevalent that many institutional investors have started making direct investments. In many cases, a venture capital fund will suggest that its investors participate in the investment round independently, since the fund is either not interested in, or is incapable of investing very large amounts of money in, a single company even if it believes in the company's potential. Other venture capitalists that are particularly visible are investment banks that have created venture capital funds under their management. Financing by Debt Beyond the initial stages, startups can resort to financing by way of debt. The term debt usually signifies a short- or long-term line of credit. The lenders can be banks, venture capitalists, or bodies which specialize in providing credit. The borrower receives the right to use the money for a pre-determined period of time in consideration for the payment of interest. The terms of the loan are set in the loan agreement. To guarantee the repayment of the debt and the interest, the loan is backed by the cash flow itself (an unsecured loan) or collateral (a secured loan). An unsecured loan is given when the creditor ascertains that the company's cash flow will suffice to pay the interest and the principal. Common indicators for measuring the borrower's ability to repay the debt are his or her EBIT and leverage (debt/equity ratio). A secured loan is typically guaranteed by a marketable asset. Financing by debt (without an equity component) is usually inaccessible to early-stage startups, which are based on high-risk growth and which lack many tangible assets, unless their startups have a good chance of securing long-term contracts with customers. At later phases of the company's life cycle, it becomes easier to resort to financial instruments containing a significant debt component. The types of financing by debt that startups commonly use are as follows: * Mezzanine loans-- As mentioned above, startups face difficulties in securing traditional financing from banks. A popular solution is the "mezzanine loan." This type of investment lies between debt and equity (hence the name). The incentive for entrepreneurs to use this instrument could be their desire to avoid dilution, on the one hand, and an inability to obtain ordinary bank loans, on the other hand. From the investors' point of view, this loan offers a higher degree of security than an ordinary investment in equity since their right is senior to that of the shareholders. The main source for mezzanine loans are commercial banks, insurance companies, and specialized entities which are associated with banks, although mezzanine loans are also offered by several funds which specialize in this type of loan. Mezzanine loans are generally given only to companies that have already started or are about to start making sales, since the repayment of the loan depends on the company's ability to generate cash flows. The criteria used by lenders to screen investments are similar to those used by venture capital funds. Generally, the securities issued in this type of investment are either high-yield convertible debentures or are accompanied by an equity kicker in the form of warrants. The rate of interest could be more than 10% above similar loans and range between 15% and 30% with the actual interest rate depending to a large extent on the equity component of the loan and naturally on the perceived risk of the loan. If the company is expected to have a negative cash flow in the first stages after the loan is granted, the payment of interest might be deferred for several years after the debenture is issued, with the interest accumulating during the first period. If the company defaults on its payments, the terms of the debenture could provide for changes in the loan terms. Such changes may include: accelerate the debenture's maturity; increase the interest rate; add warrants for additional shares (or a discount in the conversion price in the case of convertible debentures); add rights to control the board of directors, or add rights to force an issuance or sale of the company. * Bridge loan-- A bridge loan is typically a loan (for less than one year), designed to provide the company with sufficient funds to finance its current activities, pending an investment round that is expected to take place at a forthcoming time. Bridge loans are common at times close to IPOs from various financial institutions and are also common as a mechanism for funding between financial rounds, without the need to set valuation. * Other uses of debt-- In the various stages of a startup's life cycle, the company may use other sources of debt financing. For instance, many companies enable the long-term leasing of most of the equipment required by the company. The company may also obtain short-term loans for working capital needs, or obtain a line of credit from banks to be used as required. IFRAME: http://www.facebook.com/plugins/like.php?href=http://e-articles.info/e /a/title/Sources-of-Capital/&layout=standard&show_faces=true&width=450 &action=like&colorscheme=light& Share Disclaimer 1) E-articles is not responsible for the information contained by this article as well for any and all copyright infringements by authors and writers. E-articles is a free information resource. 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IFRAME: http://e-articles.info/cache.php?file=/e/a/title/Sources-of-Capital/ Sources of Capital IFRAME: /documents/header/docrep_redirector_head_cache.asp?url_file=/docrep/W4 343E/w4343e08.htm Previous Page Table of Contents Next Page _________________________________________________________________ Chapter 7 - Sources of finance _________________________________________________________________ Chapter objectives Structure of the chapter Sources of funds Ordinary (equity) shares Loan stock Retained earnings Bank lending Leasing Hire purchase Government assistance Venture capital Franchising Key terms _________________________________________________________________ Sourcing money may be done for a variety of reasons. Traditional areas of need may be for capital asset acquirement - new machinery or the construction of a new building or depot. The development of new products can be enormously costly and here again capital may be required. Normally, such developments are financed internally, whereas capital for the acquisition of machinery may come from external sources. In this day and age of tight liquidity, many organisations have to look for short term capital in the way of overdraft or loans in order to provide a cash flow cushion. Interest rates can vary from organisation to organisation and also according to purpose. Chapter objectives This chapter is intended to provide: · An introduction to the different sources of finance available to management, both internal and external · An overview of the advantages and disadvantages of the different sources of funds · An understanding of the factors governing the choice between different sources of funds. Structure of the chapter This final chapter starts by looking at the various forms of "shares" as a means to raise new capital and retained earnings as another source. However, whilst these may be "traditional" ways of raising funds, they are by no means the only ones. There are many more sources available to companies who do not wish to become "public" by means of share issues. These alternatives include bank borrowing, government assistance, venture capital and franchising. All have their own advantages and disadvantages and degrees of risk attached. Sources of funds A company might raise new funds from the following sources: · The capital markets: i) new share issues, for example, by companies acquiring a stock market listing for the first time ii) rights issues · Loan stock · Retained earnings · Bank borrowing · Government sources · Business expansion scheme funds · Venture capital · Franchising. Ordinary (equity) shares Ordinary shares are issued to the owners of a company. They have a nominal or 'face' value, typically of $1 or 50 cents. The market value of a quoted company's shares bears no relationship to their nominal value, except that when ordinary shares are issued for cash, the issue price must be equal to or be more than the nominal value of the shares. Deferred ordinary shares are a form of ordinary shares, which are entitled to a dividend only after a certain date or if profits rise above a certain amount. Voting rights might also differ from those attached to other ordinary shares. Ordinary shareholders put funds into their company: a) by paying for a new issue of shares b) through retained profits. Simply retaining profits, instead of paying them out in the form of dividends, offers an important, simple low-cost source of finance, although this method may not provide enough funds, for example, if the firm is seeking to grow. A new issue of shares might be made in a variety of different circumstances: a) The company might want to raise more cash. If it issues ordinary shares for cash, should the shares be issued pro rata to existing shareholders, so that control or ownership of the company is not affected? If, for example, a company with 200,000 ordinary shares in issue decides to issue 50,000 new shares to raise cash, should it offer the new shares to existing shareholders, or should it sell them to new shareholders instead? i) If a company sells the new shares to existing shareholders in proportion to their existing shareholding in the company, we have a rights issue. In the example above, the 50,000 shares would be issued as a one-in-four rights issue, by offering shareholders one new share for every four shares they currently hold. ii) If the number of new shares being issued is small compared to the number of shares already in issue, it might be decided instead to sell them to new shareholders, since ownership of the company would only be minimally affected. b) The company might want to issue shares partly to raise cash, but more importantly to float' its shares on a stick exchange. c) The company might issue new shares to the shareholders of another company, in order to take it over. New shares issues A company seeking to obtain additional equity funds may be: a) an unquoted company wishing to obtain a Stock Exchange quotation b) an unquoted company wishing to issue new shares, but without obtaining a Stock Exchange quotation c) a company which is already listed on the Stock Exchange wishing to issue additional new shares. The methods by which an unquoted company can obtain a quotation on the stock market are: a) an offer for sale b) a prospectus issue c) a placing d) an introduction. Offers for sale: An offer for sale is a means of selling the shares of a company to the public. a) An unquoted company may issue shares, and then sell them on the Stock Exchange, to raise cash for the company. All the shares in the company, not just the new ones, would then become marketable. b) Shareholders in an unquoted company may sell some of their existing shares to the general public. When this occurs, the company is not raising any new funds, but just providing a wider market for its existing shares (all of which would become marketable), and giving existing shareholders the chance to cash in some or all of their investment in their company. When companies 'go public' for the first time, a 'large' issue will probably take the form of an offer for sale. A smaller issue is more likely to be a placing, since the amount to be raised can be obtained more cheaply if the issuing house or other sponsoring firm approaches selected institutional investors privately. Rights issues A rights issue provides a way of raising new share capital by means of an offer to existing shareholders, inviting them to subscribe cash for new shares in proportion to their existing holdings. For example, a rights issue on a one-for-four basis at 280c per share would mean that a company is inviting its existing shareholders to subscribe for one new share for every four shares they hold, at a price of 280c per new share. A company making a rights issue must set a price which is low enough to secure the acceptance of shareholders, who are being asked to provide extra funds, but not too low, so as to avoid excessive dilution of the earnings per share. Preference shares Preference shares have a fixed percentage dividend before any dividend is paid to the ordinary shareholders. As with ordinary shares a preference dividend can only be paid if sufficient distributable profits are available, although with 'cumulative' preference shares the right to an unpaid dividend is carried forward to later years. The arrears of dividend on cumulative preference shares must be paid before any dividend is paid to the ordinary shareholders. From the company's point of view, preference shares are advantageous in that: · Dividends do not have to be paid in a year in which profits are poor, while this is not the case with interest payments on long term debt (loans or debentures). · Since they do not carry voting rights, preference shares avoid diluting the control of existing shareholders while an issue of equity shares would not. · Unless they are redeemable, issuing preference shares will lower the company's gearing. Redeemable preference shares are normally treated as debt when gearing is calculated. · The issue of preference shares does not restrict the company's borrowing power, at least in the sense that preference share capital is not secured against assets in the business. · The non-payment of dividend does not give the preference shareholders the right to appoint a receiver, a right which is normally given to debenture holders. However, dividend payments on preference shares are not tax deductible in the way that interest payments on debt are. Furthermore, for preference shares to be attractive to investors, the level of payment needs to be higher than for interest on debt to compensate for the additional risks. For the investor, preference shares are less attractive than loan stock because: · they cannot be secured on the company's assets · the dividend yield traditionally offered on preference dividends has been much too low to provide an attractive investment compared with the interest yields on loan stock in view of the additional risk involved. Loan stock Loan stock is long-term debt capital raised by a company for which interest is paid, usually half yearly and at a fixed rate. Holders of loan stock are therefore long-term creditors of the company. Loan stock has a nominal value, which is the debt owed by the company, and interest is paid at a stated "coupon yield" on this amount. For example, if a company issues 10% loan stocky the coupon yield will be 10% of the nominal value of the stock, so that $100 of stock will receive $10 interest each year. The rate quoted is the gross rate, before tax. Debentures are a form of loan stock, legally defined as the written acknowledgement of a debt incurred by a company, normally containing provisions about the payment of interest and the eventual repayment of capital. Debentures with a floating rate of interest These are debentures for which the coupon rate of interest can be changed by the issuer, in accordance with changes in market rates of interest. They may be attractive to both lenders and borrowers when interest rates are volatile. Security Loan stock and debentures will often be secured. Security may take the form of either a fixed charge or a floating charge. a) Fixed charge; Security would be related to a specific asset or group of assets, typically land and buildings. The company would be unable to dispose of the asset without providing a substitute asset for security, or without the lender's consent. b) Floating charge; With a floating charge on certain assets of the company (for example, stocks and debtors), the lender's security in the event of a default payment is whatever assets of the appropriate class the company then owns (provided that another lender does not have a prior charge on the assets). The company would be able, however, to dispose of its assets as it chose until a default took place. In the event of a default, the lender would probably appoint a receiver to run the company rather than lay claim to a particular asset. The redemption of loan stock Loan stock and debentures are usually redeemable. They are issued for a term of ten years or more, and perhaps 25 to 30 years. At the end of this period, they will "mature" and become redeemable (at par or possibly at a value above par). Most redeemable stocks have an earliest and latest redemption date. For example, 18% Debenture Stock 2007/09 is redeemable, at any time between the earliest specified date (in 2007) and the latest date (in 2009). The issuing company can choose the date. The decision by a company when to redeem a debt will depend on: a) how much cash is available to the company to repay the debt b) the nominal rate of interest on the debt. If the debentures pay 18% nominal interest and the current rate of interest is lower, say 10%, the company may try to raise a new loan at 10% to redeem the debt which costs 18%. On the other hand, if current interest rates are 20%, the company is unlikely to redeem the debt until the latest date possible, because the debentures would be a cheap source of funds. There is no guarantee that a company will be able to raise a new loan to pay off a maturing debt, and one item to look for in a company's balance sheet is the redemption date of current loans, to establish how much new finance is likely to be needed by the company, and when. Mortgages are a specific type of secured loan. Companies place the title deeds of freehold or long leasehold property as security with an insurance company or mortgage broker and receive cash on loan, usually repayable over a specified period. Most organisations owning property which is unencumbered by any charge should be able to obtain a mortgage up to two thirds of the value of the property. As far as companies are concerned, debt capital is a potentially attractive source of finance because interest charges reduce the profits chargeable to corporation tax. Retained earnings For any company, the amount of earnings retained within the business has a direct impact on the amount of dividends. Profit re-invested as retained earnings is profit that could have been paid as a dividend. The major reasons for using retained earnings to finance new investments, rather than to pay higher dividends and then raise new equity for the new investments, are as follows: a) The management of many companies believes that retained earnings are funds which do not cost anything, although this is not true. However, it is true that the use of retained earnings as a source of funds does not lead to a payment of cash. b) The dividend policy of the company is in practice determined by the directors. From their standpoint, retained earnings are an attractive source of finance because investment projects can be undertaken without involving either the shareholders or any outsiders. c) The use of retained earnings as opposed to new shares or debentures avoids issue costs. d) The use of retained earnings avoids the possibility of a change in control resulting from an issue of new shares. Another factor that may be of importance is the financial and taxation position of the company's shareholders. If, for example, because of taxation considerations, they would rather make a capital profit (which will only be taxed when shares are sold) than receive current income, then finance through retained earnings would be preferred to other methods. A company must restrict its self-financing through retained profits because shareholders should be paid a reasonable dividend, in line with realistic expectations, even if the directors would rather keep the funds for re-investing. At the same time, a company that is looking for extra funds will not be expected by investors (such as banks) to pay generous dividends, nor over-generous salaries to owner-directors. Bank lending Borrowings from banks are an important source of finance to companies. Bank lending is still mainly short term, although medium-term lending is quite common these days. Short term lending may be in the form of: a) an overdraft, which a company should keep within a limit set by the bank. Interest is charged (at a variable rate) on the amount by which the company is overdrawn from day to day; b) a short-term loan, for up to three years. Medium-term loans are loans for a period of from three to ten years. The rate of interest charged on medium-term bank lending to large companies will be a set margin, with the size of the margin depending on the credit standing and riskiness of the borrower. A loan may have a fixed rate of interest or a variable interest rate, so that the rate of interest charged will be adjusted every three, six, nine or twelve months in line with recent movements in the Base Lending Rate. Lending to smaller companies will be at a margin above the bank's base rate and at either a variable or fixed rate of interest. Lending on overdraft is always at a variable rate. A loan at a variable rate of interest is sometimes referred to as a floating rate loan. Longer-term bank loans will sometimes be available, usually for the purchase of property, where the loan takes the form of a mortgage. When a banker is asked by a business customer for a loan or overdraft facility, he will consider several factors, known commonly by the mnemonic PARTS. - Purpose - Amount - Repayment - Term - Security P The purpose of the loan A loan request will be refused if the purpose of the loan is not acceptable to the bank. A The amount of the loan. The customer must state exactly how much he wants to borrow. The banker must verify, as far as he is able to do so, that the amount required to make the proposed investment has been estimated correctly. R How will the loan be repaid? Will the customer be able to obtain sufficient income to make the necessary repayments? T What would be the duration of the loan? Traditionally, banks have offered short-term loans and overdrafts, although medium-term loans are now quite common. S Does the loan require security? If so, is the proposed security adequate? Leasing A lease is an agreement between two parties, the "lessor" and the "lessee". The lessor owns a capital asset, but allows the lessee to use it. The lessee makes payments under the terms of the lease to the lessor, for a specified period of time. Leasing is, therefore, a form of rental. Leased assets have usually been plant and machinery, cars and commercial vehicles, but might also be computers and office equipment. There are two basic forms of lease: "operating leases" and "finance leases". Operating leases Operating leases are rental agreements between the lessor and the lessee whereby: a) the lessor supplies the equipment to the lessee b) the lessor is responsible for servicing and maintaining the leased equipment c) the period of the lease is fairly short, less than the economic life of the asset, so that at the end of the lease agreement, the lessor can either i) lease the equipment to someone else, and obtain a good rent for it, or ii) sell the equipment secondhand. Finance leases Finance leases are lease agreements between the user of the leased asset (the lessee) and a provider of finance (the lessor) for most, or all, of the asset's expected useful life. Suppose that a company decides to obtain a company car and finance the acquisition by means of a finance lease. A car dealer will supply the car. A finance house will agree to act as lessor in a finance leasing arrangement, and so will purchase the car from the dealer and lease it to the company. The company will take possession of the car from the car dealer, and make regular payments (monthly, quarterly, six monthly or annually) to the finance house under the terms of the lease. Other important characteristics of a finance lease: a) The lessee is responsible for the upkeep, servicing and maintenance of the asset. The lessor is not involved in this at all. b) The lease has a primary period, which covers all or most of the economic life of the asset. At the end of the lease, the lessor would not be able to lease the asset to someone else, as the asset would be worn out. The lessor must, therefore, ensure that the lease payments during the primary period pay for the full cost of the asset as well as providing the lessor with a suitable return on his investment. c) It is usual at the end of the primary lease period to allow the lessee to continue to lease the asset for an indefinite secondary period, in return for a very low nominal rent. Alternatively, the lessee might be allowed to sell the asset on the lessor's behalf (since the lessor is the owner) and to keep most of the sale proceeds, paying only a small percentage (perhaps 10%) to the lessor. Why might leasing be popular The attractions of leases to the supplier of the equipment, the lessee and the lessor are as follows: · The supplier of the equipment is paid in full at the beginning. The equipment is sold to the lessor, and apart from obligations under guarantees or warranties, the supplier has no further financial concern about the asset. · The lessor invests finance by purchasing assets from suppliers and makes a return out of the lease payments from the lessee. Provided that a lessor can find lessees willing to pay the amounts he wants to make his return, the lessor can make good profits. He will also get capital allowances on his purchase of the equipment. · Leasing might be attractive to the lessee: i) if the lessee does not have enough cash to pay for the asset, and would have difficulty obtaining a bank loan to buy it, and so has to rent it in one way or another if he is to have the use of it at all; or ii) if finance leasing is cheaper than a bank loan. The cost of payments under a loan might exceed the cost of a lease. Operating leases have further advantages: · The leased equipment does not need to be shown in the lessee's published balance sheet, and so the lessee's balance sheet shows no increase in its gearing ratio. · The equipment is leased for a shorter period than its expected useful life. In the case of high-technology equipment, if the equipment becomes out-of-date before the end of its expected life, the lessee does not have to keep on using it, and it is the lessor who must bear the risk of having to sell obsolete equipment secondhand. The lessee will be able to deduct the lease payments in computing his taxable profits. Hire purchase Hire purchase is a form of instalment credit. Hire purchase is similar to leasing, with the exception that ownership of the goods passes to the hire purchase customer on payment of the final credit instalment, whereas a lessee never becomes the owner of the goods. Hire purchase agreements usually involve a finance house. i) The supplier sells the goods to the finance house. ii) The supplier delivers the goods to the customer who will eventually purchase them. iii) The hire purchase arrangement exists between the finance house and the customer. The finance house will always insist that the hirer should pay a deposit towards the purchase price. The size of the deposit will depend on the finance company's policy and its assessment of the hirer. This is in contrast to a finance lease, where the lessee might not be required to make any large initial payment. An industrial or commercial business can use hire purchase as a source of finance. With industrial hire purchase, a business customer obtains hire purchase finance from a finance house in order to purchase the fixed asset. Goods bought by businesses on hire purchase include company vehicles, plant and machinery, office equipment and farming machinery. Government assistance The government provides finance to companies in cash grants and other forms of direct assistance, as part of its policy of helping to develop the national economy, especially in high technology industries and in areas of high unemployment. For example, the Indigenous Business Development Corporation of Zimbabwe (IBDC) was set up by the government to assist small indigenous businesses in that country. Venture capital Venture capital is money put into an enterprise which may all be lost if the enterprise fails. A businessman starting up a new business will invest venture capital of his own, but he will probably need extra funding from a source other than his own pocket. However, the term 'venture capital' is more specifically associated with putting money, usually in return for an equity stake, into a new business, a management buy-out or a major expansion scheme. The institution that puts in the money recognises the gamble inherent in the funding. There is a serious risk of losing the entire investment, and it might take a long time before any profits and returns materialise. But there is also the prospect of very high profits and a substantial return on the investment. A venture capitalist will require a high expected rate of return on investments, to compensate for the high risk. A venture capital organisation will not want to retain its investment in a business indefinitely, and when it considers putting money into a business venture, it will also consider its "exit", that is, how it will be able to pull out of the business eventually (after five to seven years, say) and realise its profits. Examples of venture capital organisations are: Merchant Bank of Central Africa Ltd and Anglo American Corporation Services Ltd. When a company's directors look for help from a venture capital institution, they must recognise that: · the institution will want an equity stake in the company · it will need convincing that the company can be successful · it may want to have a representative appointed to the company's board, to look after its interests. The directors of the company must then contact venture capital organisations, to try and find one or more which would be willing to offer finance. A venture capital organisation will only give funds to a company that it believes can succeed, and before it will make any definite offer, it will want from the company management: a) a business plan b) details of how much finance is needed and how it will be used c) the most recent trading figures of the company, a balance sheet, a cash flow forecast and a profit forecast d) details of the management team, with evidence of a wide range of management skills e) details of major shareholders f) details of the company's current banking arrangements and any other sources of finance g) any sales literature or publicity material that the company has issued. A high percentage of requests for venture capital are rejected on an initial screening, and only a small percentage of all requests survive both this screening and further investigation and result in actual investments. Franchising Franchising is a method of expanding business on less capital than would otherwise be needed. For suitable businesses, it is an alternative to raising extra capital for growth. Franchisors include Budget Rent-a-Car, Wimpy, Nando's Chicken and Chicken Inn. Under a franchising arrangement, a franchisee pays a franchisor for the right to operate a local business, under the franchisor's trade name. The franchisor must bear certain costs (possibly for architect's work, establishment costs, legal costs, marketing costs and the cost of other support services) and will charge the franchisee an initial franchise fee to cover set-up costs, relying on the subsequent regular payments by the franchisee for an operating profit. These regular payments will usually be a percentage of the franchisee's turnover. Although the franchisor will probably pay a large part of the initial investment cost of a franchisee's outlet, the franchisee will be expected to contribute a share of the investment himself. The franchisor may well help the franchisee to obtain loan capital to provide his-share of the investment cost. The advantages of franchises to the franchisor are as follows: · The capital outlay needed to expand the business is reduced substantially. · The image of the business is improved because the franchisees will be motivated to achieve good results and will have the authority to take whatever action they think fit to improve the results. The advantage of a franchise to a franchisee is that he obtains ownership of a business for an agreed number of years (including stock and premises, although premises might be leased from the franchisor) together with the backing of a large organisation's marketing effort and experience. The franchisee is able to avoid some of the mistakes of many small businesses, because the franchisor has already learned from its own past mistakes and developed a scheme that works. Now attempt exercise 7.1. Exercise 7.1 Sources of finance Outdoor Living Ltd., an owner-managed company, has developed a new type of heating using solar power, and has financed the development stages from its own resources. Market research indicates the possibility of a large volume of demand and a significant amount of additional capital will be needed to finance production. Advise Outdoor Living Ltd. on: a) the advantages and disadvantages of loan or equity capital b) the various types of capital likely to be available and the sources from which they might be obtained c) the method(s) of finance likely to be most satisfactory to both Outdoor Living Ltd. and the provider of funds. Key terms Bank lending Capital markets Debentures Deferred ordinary shares Franchising Government assistance Hire purchase Loan stocks New share issue Ordinary shares PARTS Preference shares Retained earnings Rights issue Sources of funds Venture capital _________________________________________________________________ Previous Page Top of Page Next Page #About.com 1. Home 2. Business & Finance 3. Inventors [money_inventors;kw=;site=inventors;chan=money;pos=lb;sz=728x90;ord=1B 1DGUa2A20kA0U7g] About.com Inventors ____________________ (Submit) Search * Inventors * Basics * Intellectual Property * History & Bios Filed In: 1. Selling Your Product Venture Capital - Firms and Sources Venture capital firms and finding a venture capital source. Use the lenders database and venture capital database with expert advice for getting business loans, commercial real estate loans, venture capital, technology incubators, IPO financing and more. 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All Rights Reserved. * Copyright/IP Policy - * Privacy Policy - * About Our Ads - * Terms of Service - * Community Guidelines * - Safety Tips Skip Navigation Oxford Journals * Contact Us * My Basket * My Account Review of Financial Studies * About This Journal * Contact This Journal * Subscriptions * View Current Issue (Volume 24 Issue 1 January 2011) * Archive * Search * Oxford Journals * Social Sciences * Review of Financial Studies * Volume19, Issue1 * Pp. 45-79. Does the Source of Capital Affect Capital Structure? 1. Michael Faulkender 1. Washington University in St. Louis 1. Mitchell A. Petersen 1. Northwestern University and NBER 1. Address correspondence to: Mitchell Petersen, 2001 Sheridan Road, Evanston, IL 60208. E-mail: mpetersen{at}kellogg.northwestern.edu. Abstract Prior work on leverage implicitly assumes capital availability depends solely on firm characteristics. However, market frictions that make capital structure relevant may also be associated with a firm’s source of capital. Examining this intuition, we find firms that have access to the public bond markets, as measured by having a debt rating, have significantly more leverage. Although firms with a rating are fundamentally different, these differences do not explain our findings. Even after controlling for firm characteristics that determine observed capital structure, and instrumenting for the possible endogeneity of having a rating, firms with access have 35% more debt. * © The Author 2005. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For permissions, please email: journals.permissions@oxfordjournals.org. « Previous | Next Article »Table of Contents This Article 1. Rev. Financ. Stud. (Spring 2006) 19 (1): 45-79. doi: 10.1093/rfs/hhj003 First published online: October 28, 2005 1. » AbstractFree 2. Full Text (HTML)Free 3. 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Online ISSN 1465-7368 - Print ISSN 0893-9454 Copyright © 2011 Society for Financial Studies Oxford Journals Oxford University Press * Site Map * Privacy Policy * Frequently Asked Questions Other Oxford University Press sites: [Oxford University Press.........] Go IFRAME: g5name IFRAME: about:blank Share on Facebook Share on Twitter Email On this page Library * Animal Life * Business & Finance * Cars & Vehicles * Entertainment & Arts * Food & Cooking * Health * History, Politics, Society * Home & Garden * Law & Legal Issues * Literature & Language * Miscellaneous * Religion & Spirituality * Science * Shopping * Sports * Technology * Travel & Places * Q & A Answers.com IFRAME: emailWindowFrame1 Nontraditional Financing Sources Gale Encyclopedia of Small Business: Nontraditional Financing Sources Home > Library > Business & Finance > Small Business Encyclopedia Entrepreneurs can turn to a variety of sources to finance the establishment or expansion of their businesses. Common sources of business capital include personal savings, loans from friends and relatives, loans from financial institutions such as banks or credit unions, loans from commercial finance companies, assistance from venture capital firms or investment clubs, loans from the Small Business Administration and other government agencies, and personal or corporate credit cards. But for some business-people, these sources of financing are either unavailable, or available with restrictions or provisions that are either impossible for the company to meet or deemed excessive by the business owner. In such instances, the capital-hungry entrepreneur has the option of pursuing a number of nontraditional financing sources to secure the money that his or her company needs. Some of the more common nontraditional financing sources include selling assets, borrowing against the cash value of a life insurance policy, and taking out a second mortgage on a home or other property. SELLING ASSETS. Some entrepreneurs choose to sell some of their personal or business assets in order to finance the opening or continued existence of their enterprise. Generally, business owners who have already established the viability of their firm and are looking to expand their operations do not have to take this sometimes dramatic course of action, since their record will often allow them to secure capital from another source, either private or public. Whether selling personal or business assets, the small business owner should take a rational approach. Some entrepreneurs, desperate to secure money, end up selling business assets that are important to basic business operations. In such instances, the entrepreneur may end up accelerating rather than halting the demise of his or her business. Only nonessential equipment and inventory should be sold. Similarly, care should be taken in the selling of personal assets. Items like boats, antiques, etc. can fetch a decent price. But before embarking on this course of action, the entrepreneur should objectively study whether the resulting income will be sufficient, or whether the enterprise's financial straits are an indication of fundamental flaws. BORROWING AGAINST THE CASH VALUE OF YOUR LIFE INSURANCE. Entrepreneurs who have a whole life policy have the option of borrowing against the policy (this is not an option for holders of term insurance). This can be an effective means of securing capital provided that the owner has held the policy for several years, thus giving it some cash value. Insurers may let policyholders borrow as much as 90 percent of the value of the policy. As long as the policyholder continues to meet his or her premium payment obligations, the policy will remain intact. Interest rates on such loans are generally not outrageous, but if the policyholder dies during the period in which he or she has a loan on the policy, benefits are usually dramatically reduced. SECOND MORTGAGE. Some entrepreneurs secure financing by taking our a second mortgage on their home. This risky alternative does provide the homeowner with a couple of advantages: interest on the mortgage is tax deductible and is usually lower than what he or she would pay with a credit card or an unsecured loan. But if the business ultimately fails, this method of financing could result in the loss of your home. "Second mortgages are best for people who want to borrow all the money they need at one time and secure fixed, equal payments," wrote Cynthia Griffin in Entrepreneur. OTHER POSSIBLE SOURCES OF FINANCING. Some entrepreneurs obtain financing for growth and expansion through franchising or licensing. Basically, they get money by selling the rights to a unique business or product to other companies. Other small business owners are able to form alliances or partnerships with other firms that have a vested interest in their success, such as customers, suppliers, or distributors. These business owners may obtain funds from their partners through cooperative work agreements, barter arrangements, or trade credit. The Internet provides another potential source of leads for loans from nontraditional sources. For example, America's Business Funding Directory, at http://www.businessfinance.com, includes a searchable database of nontraditional funding sources. Experts recommend using nontraditional financing to start a business or provide funds during periods of rapid growth, but emphasize that small business owners should consider it a temporary arrangement. "You should look at nontraditional financing," business loan broker Edward C. Hopson said in the Knight-Ridder/Tribune Business News, "but look at it with an eye to when can I get out of this, not as permanent financing…. When you get strong, the banks will be calling you." Further Reading: Andresky Fraser, Jill. "Show Me the Money: You Can Look for Money in All the Wrong Places." Inc. March 1997. "Creative Financing." Phoenix Business Journal. September 29, 2000. Entrepreneur Magazine Guide to Raising Money. John Wiley & Sons, 1998. Financing for the Small Business. Small Business Administration, 1990. Griffin, Cynthia. "Breaking the Bank." Entrepreneur. March 1998. "Passing the Buck." Entrepreneur. May 1997. Stolze, William J. Start Up Financing: An Entrepreneur's Guide to Financing New or Growing Business. Career Press, 1997. Vanac, Mary. "Alternative Financing Helps Small Businesses Bridge the Lending Gap." Knight-Ridder/Tribune Business News. August 15, 1999. Home of Wiki & Reference Answers, the world’s leading Q&A site Reference Answers English▼ English▼ Deutsch Español Français Italiano Tagalog * * Search unanswered questions... ______________________________________________________________________ [blank.gif?v=78674]-Submit * Browse: Unanswered questions | Most-recent questions | Reference library Enter a question here... Search: (_) All sources (_) Community Q&A (_) Reference topics ______________________________________________________________________ [blank.gif?v=78674]-Submit * Browse: Unanswered questions | New questions | New answers | Reference library Related Videos: Top [38355888_12.jpg] [btn_play_small.png] Click to Play Sources of Finance for a Business [155736450_3.jpg] [btn_play_small.png] Click to Play Sources Of Free Money For Graduate Students [287352139_3.jpg] [btn_play_small.png] Click to Play How to Finance Home Equity Loan [287351878_3.jpg] [btn_play_small.png] Click to Play How to Finance Your College Education View more Business & Finance videos Related answers: [icon-relatedquestion-answered.gif] Discuss any three forms and sources of business financing? Read answer... [icon-relatedquestion-answered.gif] Why is it important to match the type of asset and the source of financing? Read answer... [icon-relatedquestion-answered.gif] Name and explain five sources of debt financing? Read answer... Help us answer these: [icon-relatedquestion-UNanswered.gif] What are sources of financing? [icon-relatedquestion-UNanswered.gif] Sources of business financing in nigeria? [icon-relatedquestion-UNanswered.gif] Sources of short-term financing? Post a question - any question - to the WikiAnswers community: ______________________________________________________________________ Copyrights: $copyright.smallImage.alttext Gale Encyclopedia of Small Business. Encyclopedia of Small Business. Copyright © 2002 by The Gale Group, Inc. All rights reserved. Read more Related answers * What are external sources of financing? * What are the 3 main sources of financing for businesses? * What is a not source? » More Answer these * Nontraditional Financing Sources for human services? * Expain the various nontraditional sources of long term financing? » More Follow us Facebook Twitter YouTube IFRAME: /main/noscript_ads.jsp?title=nontraditional%20financing%20sources&ntabs=3&category= blufr Site * Sitemap * ReferenceAnswers * WikiAnswers * VideoAnswers * blufr Company * About * Jobs * Press * NASDAQ:ANSW Legal * Terms of Use * Privacy Policy * IP Issues * Disclaimer Tools * 1-Click Answers * AnswerTips * Webmasters * Apps/Add-ons Community * Guidelines * Reputation * Roles * Help Updates * Email * Watchlist * RSS * Blog International Sites English Deutsch Español Français Italiano Tagalog Copyright © 2011 Answers Corporation [p?c1=2&c2=8187772&cv=2.0&cj=1] [pixel.gif?bad-robot] IFRAME: /xl?c=SCSG;iframeid=ad_4D2F26BA8BD2_SCSG Scoop - Independent News Contact Newsagent Login World Search Scoop ____________________ [red_icon.gif]-Submit WIRES: * SCOOPS * PARLIAMENT * POLITICS * REGIONAL * BUSINESS * SCI-TECH * WORLD * CULTURE * EDUCATION * HEALTH * SECTIONS: * COMMENT * MULTIMEDIA * NZ POLITICS * BIZ & SCI/TECH * WORLD * LIFESTYLE * ARCHIVES * MOST READ * VIDEO World Video | Defence | Fiji | Foreign Affairs | Natural Events | Trade | NZ in World News | NZ National News Video | NZ Regional News | More Categories Find related articles E-mail It Print It Scoop It Scoop >> World >> SPC seeks new sources of vital health funding Saturday, 30 October 2010, 10:26 pm Press Release: Secretariat of the Pacific Community SPC seeks new sources of vital health funding Secretariat of the Pacific Community, Noumea, Friday 29 October 2010—The Secretariat of the Pacific Community (SPC) is seeking new sources of funding to sustain the long-term battle against the epidemic of non-communicable diseases (NCDs) which kill more than half of the region’s people prematurely. Delegates at the 40th meeting of SPC’s Committee of Representatives of Governments and Administrations (CRGA) in Noumea voiced concern on Wednesday that SPC’s public health division could lose some of its technical capacity to respond to this high priority health concern and on pandemic preparedness. Related Stories on Scoop * International Year of Biodiversity 06/12/2010 * Pacific Health Professionals Address Epidemics 02/11/2010 * Major gathering of Pacific health professionals 01/11/2010 * SPC Will Be A 'Larger Organisation' In 2011 29/10/2010 * SPC To Help Fight Cholera Outbreak 08/01/2010 Results powered by search.scoop.co.nz More Related Stories >>> The division’s director, Mr Bill Parr, told the meeting that one of the largest health projects managed by SPC—the AUD$26million Pacific NCD Programme funded by Australia and New Zealand—was due to finish at the end of 2011. Fiji described this work as ‘vital to our communities’ and for which development partners should be thanked. It was concerned though about the loss of funding and suggested that SPC seek support from alternative, non-traditional sources such as China to ‘lighten the load carried by our traditional donors’. Samoa noted the bleak picture for the Pacific of having amongst the world’s highest rates of NCDs—such as heart disease, diabetes and cancer—and plateaus in life expectancy rates in many countries of the Pacific. It wanted to associate with Fiji in its call on CRGA to recommend alternative, non-traditional donors. The work of SPC on NCDs, TB and influenza preparedness was greatly appreciated, Federated States of Micronesia (FSM) and Kiribati said. They were concerned that the division may lose some of its capacity to respond on these issues. New Zealand noted the concerns and added that as projects concluded and countries now had national strategies, there was a need to reflect on what needs to be delivered at a regional level. In response to the submissions, SPC Director-General Dr Jimmie Rodgers said it was crucial that countries had the capacity to manage large grants such as those from the Global Fund on malaria and from AusAID and NZAid on NCDs. As countries developed this capacity, SPC could withdraw from managing grants. But in the meantime if they requested help, SPC could not decline on the basis of it not being defined as a ‘regional’ project. SPC had meanwhile started talking to new potential development partners and were keen to follow through to ensure the long-term sustainability of assistance. “We are reasonably good fisher folks (in the region) and our lines are out there,” he told the meeting. With 63% of its health budget tied up in grant management of disease-specific projects, Dr Rodgers said SPC was working on an exit strategy from managing funds. “We do not see grant management as a long-term role for SPC,” he said. Likewise, in areas where SPC has expertise, it would prefer development partners first use SPC’s technical assistance expertise on national projects. The tendency was to use consultants, which while good usually, did not leave behind a backstopping provision of assistance. It was very important that SPC become the first stop in dealing with countries. At the request of its member countries, the public health division was being restructured from a disease and development funding focus to a ‘whole of health’ and country-based approach to support the 1995 Healthy Islands vision of Pacific Islands health ministers. When completed in early 2011, the division will have four new units: disease surveillance, research, control and response; health advancement; grant management; and quality, performance and management support. Mr Bill Parr said the high reliance on project funding represented a particular vulnerability for the division. In spite of the challenges of the restructure, Mr Parr said the division continued to make a difference in the region in 2010. He cited SPC projects with other agencies that helped reduce mortality and prevalence rates of TB (down 39% and 43% respectively from 2000 to 2010 [latest WHO revised estimates]), and the incidence of confirmed malaria (down 60% over the past seven years). Thanks to the SPC-led Pacific NCD programme with WHO, 14 Pacific Islands countries and territories have national NCD plans and 80 per cent of countries and territories are covered. Fifteen major country contracts have been signed, 12 health professionals appointed as national NCD coordinators, and 48 small grants awarded to 18 countries on projects aimed at the key risk factors of smoking, excessive alcohol consumption, physical activity and nutrition. More people are receiving HIV counseling and testing. Diagnosis and treatment of sexually transmitted infections (STIs) among pregnant women are increasing, Mr Parr said. In some countries 40 per cent sexually active young people have Chlamydia. The division had also contributed positively to health system strengthening, preparedness for disease outbreaks, laboratory and diagnostic services, health financing, procurement and supply management systems. A total of 44 training course were delivered to 478 health workers in 12 PICTs, and 33 national health positions financed through grants in the year to date. ends * Subscribe * News Alerts * Rss World Headlines WORLD > > Full Coverage: Palin Blood Libel [ff2c904907211fe90ef8.jpeg] Queensland Floods: Flickr Photo Essays Scoop has picked out a selection of the best Flickr photos of the floods in Queensland. The photos show extensive flooding in the Queensland featuring flood ravaged towns Toowoomba and Rockhampton. Photo essay #1; Photo essay #2 Out-link: Premier Anna Bligh says some Brisbane residents are waking up a ``post-war zone'' this morning after the devastating floods that have destroyed a number of suburbs. While the Brisbane River peak was lower than first feared, and well below the record levels of the 1974 floods, thousands of homes and businesses have been wiped out, and the Premier says more heartbreak still lay ahead for more of the city's residents. More>> ALSO: * Ministry of Civil Defence and Emergency Management - begins for second NZ Response Team * NZ Red Cross - Red Cross Names Emergency Team for Queensland Floods * Auckland City Council - Auckland offers support to flood-ravaged sister city * Wellington City Council - Wellingtonians Help Out in Flood Ravaged Queensland * Ministry of Foreign Affairs and Trade - 0800 number activated for QLD flood enquiries * ANZ Bank - ANZ opens account for NZers to help Australian flood relief * NZ Red Cross - Red Cross Accepts Donations for Queensland Floods * Pacific Conference of Churches - Pray for the situation in flood devastated Queensland * Department Of Internal Affairs - NZ Response Team return to Condamine * Queensland State Govt - Queensland Flood Press Conference 10 January 2011 * Wellington.Scoop - Briefing in Wellington, then four Red Cross staff will be sent to Queensland * Wellington.Scoop - Wellington ready to send more volunteers to Queensland for flood relief * Queensland State Govt - Queensland motorists urged to avoid travel * Queensland State Govt - Free legal information for Queensland flood victims * Attorney-General for Australia - Australian Government Disaster Payments near $3 million * Queensland State Govt - QLD Premier Flooding Press Conference 11 January 2011 * Queensland State Govt - QLD Premier Joint Flood Press Conference with Gillard * Queensland State Govt - Queensland Boats Being Sent into Open Water * Queensland State Govt - Three Quarters of Queensland Disaster Declared * Queensland State Govt - Plea to South East Queensland Drivers: Stay Off the Roads [e7eafe21a62d09aa6f85.jpeg] Scoop Link: Brisbane Suburbs Start To Count The Cost After Flood PREMIER Anna Bligh says some Brisbane residents are waking up a ``post-war zone'' this morning after the devastating floods that have destroyed a number of suburbs. While the Brisbane River peak was lower than first feared, and well below the record ... More>> ALSO: * The Scoop Team - Photo Essay: Queensland Flooding January 2011 * The Scoop Team - Photo Essay: Brisbane Flooding January 2011 * Prime Minister of Australia - Julia Gillard’s Press Conference on Queensland Flooding * Science Media Centre - Queensland flood crisis - experts respond * Queensland State Govt - QLD Premier Flooding Press Conference 11 January 2011 * Queensland State Govt - Three Quarters of Queensland Disaster Declared * Queensland State Govt - QLD Premier Joint Flood Press Conference with Gillard * Department Of Internal Affairs - NZ Response Team return to Condamine [e35e3dd59c72e8e40f44.jpeg] Flooding: UNICEF Responds To Sri Lanka Floods 12 January 2011 – UNICEF is rushing emergency supplies to eastern Sri Lanka as hundreds of thousands of people have been displaced by flooding. Water levels in some areas are two metres higher than normal – and still rising. More>> ALSO: * United Nations - Floods Continue to Displace Thousands of People in Sri Lanka * United Nations - Thousands Displaced as Rains and Floods Hit Sri Lanka [d84f99699cf77b99c389.jpeg] UNICEF: Photo Gallery - Haiti Earthquake One Year On One year after the devastating January 12 earthquake shook their fragile lives, Haiti’s four million children are still reeling from the lingering impact of the disaster. More than 220,000 lives were lost, and countless families were separated, ... More>> ALSO: * United Nations - UN Marks One-Year Anniversary of Haiti Earthquake * Oxfam - Year of indecision leaves Haiti’s recovery at a standstill * United Nations - Haiti: UN Urges Greater Attention to Fundamental Rights [5db3da5ebba784c28457.jpeg] The White House: U.S President Obama Speaks On The Shootings In Tucson THE PRESIDENT: As many of you are aware, earlier today a number of people were shot in Tucson, Arizona, including several who were meeting at a supermarket with their congresswoman, Gabrielle Giffords. We are still assembling all the facts, but we ... More>> ALSO: * William Rivers Pitt - William Rivers Pitt: Poor, Poor Sarah * The White House - Statement by the U.S Vice President on Tucson Tragedy * US Department of Homeland Security - U.S Homeland Security Secretary on Tucson Tragedy * United States Department of Justice - U.S Attorney General on Shooting in Arizona * NASA - NASA Statement on the Shooting of Congresswoman Giffords [3ec095583f4d93f1c836.jpeg] World Bank: Most Developing Countries Have Now Recovered From Crisis The world economy is moving from a post-crisis bounce-back phase of the recovery to slower but still solid growth this year and next, with developing countries contributing almost half of global growth, says the World Bank’s latest Global Economic Prospects ... More>> [9894a4ffd9a8d655582b.jpeg] The Scoop Team: Full List Of Wikileaks Published On Scoop – 10-01-11 Poloff delivered reftel demarche to Michael McBryde, the Foreign Ministry's UN Division Deputy Director, urging GNZ to vote no or abstain (as NZ did in November 2009) on the February 26 UN Goldstone Report draft resolution recently ... More>> ALSO: * Scoop Link - WikiLeaks: What our politicians didn't want you to know * Scoop Link - WikiLeaks: Drug firms tried to ditch Clark [a95ada363f1e5c34eebb.jpeg] World News: Sharing Power – The End Of ‘fortress’ Conservation? Will conservation organisations finally take practical action to implement agreed commitments that recognise the rights of indigenous peoples in protected areas? Over the last 10 years governments and conservation organisations have made significant ... More>> Get More From Scoop [247565faf938d1b79d83.jpeg] Submit News/Press Releases To Scoop [1db8ad2d3a6c3ec14e72.jpeg] Join The Scoop Media Facebook Group [741ef64b0f6ca75ea195.jpeg] Follow Scoop Independent News on Twitter [2900_Ffunnell_Jobs_160x40.png] Search latest Jobs Positions $150k+ NZ Govt Jobs Media & Ent. Jobs NZ IT Positions Salary Advice * NZ On Screen Latest * Screentalk Interviews * This episode from series five of Kete Aronui, a documentary series featuring Aotearoa's artists that screened on Māori Television, follows the careers of iconic contemporary dancers Taane Mete and Tairoa Royale. For both, training at Te Whaea propelled them into their art, teaching them not only technique but also a way of life. Featuring footage of Royale dancing in Douglas Wright's Forever (1993), the excerpt also includes a dance class with Michael Parmenter, another dance great, and discussion of dance companies Limbs and Black Grace. Kete Aronui - Taane Mete & Tairoa Royale 13 Feb- Television, 2007 * Episode 17, series five of Kete Aronui, a documentary series featuring Aotearoa's artists that screened on Maori Television, follows film pioneer Merata Mita. Mita produced vital work anchored in culture and community. This extract concentrates on the occupation of Bastion Point - Mita and protest leader Joe Hawke talk of how 25 May 1978 shaped her concerns as a filmmaker: "It was life, it was a transformation". Includes footage from Patu, Mauri, Bastion Point: Day 507, and Utu, as well as covering Mita's work running a lab for indigenous filmmakers. Kete Aronui - Merata Mita 13 Feb- Television, 2007 * A tale of infuriating fathers and very fast go-karts, The Hopes and Dreams of Gazza Snell marks Robyn Malcolm’s first leading role on film. Malcolm plays Gail, long-suffering wife to the charming, ambitious Gazza Snell. Obsessed with go-karting, Gazza has banked heavily on the hope his sons’ racing talents will result in motorsport glory. But Gail is unconvinced. Australian talent William McInnes (Unfinished Sky, SeaChange) plays Gazza; the script is by Insiders Guide to Happiness award-winners David Brechin-Smith and Brendan Donovan (who also directs). The Hopes and Dreams of Gazza Snell 13 Feb- Film, 2010 * Episode four, series four of this Māori artists’ profile series, tracks eminent photographer Fiona Pardington. In this extract Pardington works with her brother Neil, and discusses her life path: her Māori roots, wanting to be a photographer at age six, art school, and the hard road to making a living as an artist. Describing her medium as one of mood and depth, her search is for a balance of knowledge and wairua. Includes images of her stunning interpretations of cultural taonga, such as specimens of esteemed (and extinct) huia birds, and carved pounamu. Kete Aronui - Fiona Pardington 13 Feb- Television, 2006 * Made in the early 70s, this 13-part National Film Unit series includes footage taken from several NFU programmes and archival sources. The nostalgia is doubled as bowtie-wearing presenter Bernard Kearns presents footage alongside interviews with elderly gents and ladies who reminisce about the good old days. This edition focuses on the opening decades of the 20th century; things take a dark turn when Kearns discusses World War I and provides alarming statistics of loss of life. The Years Back - The Twentieth Century 12 Feb- Television, 1973 * Actor Bernard Kearns presents a survey of NZ life in the 30s in this episode of the National Film Unit series The Years Back. The documentary (now an antiquity in itself), includes a wealth of footage taken from NFU stock: the aftermath of the 1931 Napier earthquake, the Depression (as Kearns bluntly states, “there was a lot of misery in the 30s”), and runner Jack Lovelock’s gold medal triumph at the Berlin Olympics. There’s also editorial flair as the lavish coronation ceremony of King George VI is unashamedly juxtaposed with the A&P show back home. The Years Back - The Thirties 12 Feb- Television, 1971 More RSS RSS News Alerts News Alerts * Michael Bennett on directing and cow whispering 10 Jan | Screen Talker * Susan Wood – facing the news 04 Jan | Screen Talker * Katie Wolfe – on acting and directing 21 Dec | Screen Talker * Rachel Gardner – Great Southern Woman 13 Dec | Screen Talker * A chat with Tim Balme 05 Dec | Screen Talker * The rise and rise of Antony Starr 28 Nov | Screen Talker * Tony Williams – bugger me! 4:51 AM | Screen Talker More RSS RSS News Alerts News Alerts New Zealand Parliament News Coverage - Live LATEST HEADLINES * WORLD * Selection of MRP members should stop, say church leaders 4:12 PM | West Papu... * IFEX Communiqué Vol 20, No 02 4:08 PM | IFEX * World Bank: most developing countries have recovered from FC 4:00 PM * UNICEF responds to Sri Lanka floods 2:59 PM | UNICEF * Most developing countries have now recovered from crisis 1:58 PM | World Ban... * Borneo indigenous leaders arrested 12:58 PM | Survival International * Coalition of Papuan People for Truth want disbandment of MRP 12:57 PM More RSS RSS * Pacific.Scoop * Cafe Pacific * PMW * New Caledonia’s Loyalty Islands on red alert for c... 4:52 AM | Rua * Selection of MRP members should stop, say church l... 2:12 PM | admin * Digicel Continues Pacific Rollout 1:24 PM | admin * Coalition of Papuan People for Truth want disbandm... 10:57 AM | admin * Air New Zealand Announces Agreement with Virgin At... 8:05 AM | admin * Jimmy Buffett & the Coral Reefer Band Announce One... 8:02 AM | admin * Undernews For January 16 7:52 AM | admin More RSS RSS News Alerts News Alerts * Unmasking the Fiji blogger facade | cafe pacific * Café Pacific's New Year Honours list 2010 | cafe pacific * Hepi Krismas dear readers | cafe pacific * Pacific journalists face tough struggle tackling c... | cafe pacific * How 'peace journalism' surfaced in the Pacific | cafe pacific * Farewell Comrade Max Watts (1928-2010) | cafe pacific * Top Asia-Pacific editor advocates paradigm shift t... | cafe pacific More RSS RSS News Alerts News Alerts * * * * * * More RSS RSS News Alerts News Alerts * EDITORS PICKS * SITEWIDE MOST READ * 1. 3News Video: Brisbane: 'Horrifying' flooding set to worsen * 2. 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If you are unsure, contact your funding authority (see below for details). You should ensure any applications for funding are sent as soon as possible to receive all awards and loans in time for the beginning of the first semester. For further information and guidance please contact the Student Funding Adviser. SCOTTISH STUDENTS Apply to the Student Awards Agency for Scotland. Scottish students who are new entrants to higher education will receive assistance in the form of the following package: Tuition Fees The Student Awards Agency for Scotland will pay tuition fees for all eligible Scottish domiciled students (& EU students from outwith the UK) studying full-time higher education courses at a Scottish institution. The tuition fee for Scottish undergraduate courses is set at £1,820 for 2009/2010. Living Cost Support Depending on individual circumstances, Scottish students studying full-time higher education courses at a Scottish institution can apply for a student loan if eligible. Some students will be entitled to extra help with living costs through non-repayable supplementary bursaries or grants. Young Students Bursary The Young Students Bursary is for students under the age of 25 who have not been self supporting for the past three years or have been self supporting and have a dependent child. It is means tested on parental/household income. The bursaries are not repayable and are available only to Scottish students studying in Scotland (excluding Allied Health Profession Courses and Nursing). Childcare Fund This is a discretionary payment made by the University from funds provided by the Scottish Government. It can help, depending on individual circumstances, to cover the costs for children placed with a Childminder, Nursery or After School Club. Student Loans The remaining part of the package consists of a student loan. Mature students are eligible to apply for the maximum student loan. The Young Student package will be made up of bursary (depending on household income) and student loan. STUDENTS FROM ENGLAND Apply to Student Finance Direct www.studentsupportdirect.co.uk English students should apply to Student Finance Direct for their Student Loan and for the Tuition Fee Loan that may be available to help with the cost of tuition fees. STUDENTS FROM WALES Apply to Student Finance Wales www.studentfinancewales.co.uk Welsh students should apply to Student Finance Wales for their Student Loan and for the Tuition Fee Loan that may be available to help with the cost of their tuition fee. STUDENTS FROM NORTHERN IRELAND Apply to Student Finance NI www.studentfinanceni.co.uk Northern Irish students should apply to Student Finance NI for their Student Loan and for the Tuition Fee Loan that may be available to help with the cost of their tuition fee. EUROPEAN UNION STUDENTS Apply to the Student Awards Agency for Scotlandwww.saas.gov.uk The majority of students from the European Union who intend to study at a Scottish institution will be entitled to free tuition fees only. Some EU students may qualify for a Student Loan however the rules are complex and the SAAS website should be referred to at www.saas.gov.uk (students from abroad). PROFESSION STUDENTS Apply to the Student Awards Agency for Scotland www.saas.gov.uk Both young and mature students from the UK taking a full-time degree in an Allied Health Profession are eligible for free tuition fees, and a living cost support package made up of a Department of Health means-tested bursary and a non means-tested student loan. Funding differs for those who have received support for previous study. Scottish domiciled students should apply to SAAS. Students not domiciled in Scotland would apply to their local body (see above) for the student loan element and to SAAS for the fees and bursary element of this package. Courses in this category are - Occupational Therapy, Physiotherapy, Podiatry, Speech and Language Therapy, Dietetics and Diagnostic & Therapeutic Radiography. In Scotland, Audiology is not regarded as an Allied Health Profession. NURSING STUDENTS Apply to the Student Awards Agency for Scotlandwww.saas.gov.uk Students from all parts of the UK taking full-time degrees in Nursing are eligible for free tuition fees and a non means-tested bursary. Students who have dependents may receive additional allowances. INTERNATIONAL STUDENTS Before accepting a place, international students are advised to investigate all possible sources of financial help from their own country. Additional advice may be sought from local Embassies, High Commissions and British Council Offices. Financial help may also be available through international charities. For further information please consult the International Student section for perspective students on the QMU website at www.qmu.ac.uk. INDIVIDUAL LEARNING ACCOUNTS If you are over 16 and live in Scotland you may be eligible for funding of up to £500 from ILA Scotland if you intend to study on a part-time basis. This is a Scottish Government scheme that helps anyone who earns less than £22,000 a year to pay for their learning. Your first step is to register with ILA Scotland. For further information see the ILA website http://www.ilascotland.org.uk or contact studentfunding@qmu.ac.uk You must be in receipt of funding from ILA before the start of your course. ILA account details and course information must be given to Karen Inglis, Finance Office Manager as soon as you have matriculated. Once your account has been registered by QMU you will receive a Learning Token from ILA within 10 working days. This must be signed and returned to Karen Inglis immediately. Failure to comply with ILA conditions may make you liable for the full fees. SCHOLARSHIPS Queen Margaret University is pleased to offer a number of opportunities to apply for Scholarships and Bursaries for both undergraduate and postgraduate students. ^ to top last modified 03/08/10 Queen Margaret University, Edinburgh EH21 6UU - Tel: +44 (0)131 474 0000 find us | contact us © Queen Margaret University 2005. terms of use | accessibility | FOI & data protection