Why corporate finance, shareholder personal funds and capital protection are inseparable components of business strategy
Tags: Personal, Bussiness, Strategy, Capital, Corporate Finance

How often do we puzzle over tasks, the solution of which in the end turns out to be obvious. All that had to be done was to step aside from the question and try to look at it in a comprehensive manner or use external expertise. Financial challenges are no exception.

When communicating with clients, I note a repeating story: people focus on either personal or corporate finance, not always realizing the effectiveness of the synergy of these two components. In financial practice, I recommend linking three areas: wealth management, corporate finance and capital protection.

Let's consider each of them separately.

If we talk about corporate finance, turning to external expertise, business owners receive complete and clear information regarding their assets. These are both growth triggers, opportunities to maximize the company's value, and the optimal financing structure, taking into account the current phase of the credit cycle.

In-depth analysis of the credit cycle and financial market conditions to determine the optimal time to buy / sell a private business or part of it. An experienced financial advisor will advise in which markets and in what period of time it is appropriate for the client to implement his business plans, in accordance with which strategy to develop the company.

At the same time, not only to develop a strategy, but also to take a direct part in its implementation, which involves supporting M&A transactions, implementing an investment strategy, investing in different asset classes, calculating the optimal result between the profitability of a business and the financial risks that this business assumes. ...

Suppose, within the framework of the chosen strategy, you want to buy a business or part of it from a foreign partner. In order to exclude unpleasant surprises later, you need to have a clear understanding of the history of the origin of this business and the funds put on its foundation and development.

Your foreign partners, in turn, want to make sure of the legality and purity of the origin of the money invested in their business on your part. This is an example of the actualization of capital protection issues. It is very important that in the framework of due diligence, not only liquid assets are taken into account, but also the money that we place in our accounts. Many people overlook this aspect as one of the main criteria for a successful transaction.

The capital protection function also involves the development of a tax strategy and a strategy for creating legal structures, optimization in the legal field of taxation using holding structures and trusts. Now this issue has become much more complicated: it is not enough just to open a company in Cyprus. Regulators and banks require the presence of a real office and confirmation of the actual activities of the company in the country of registration.

Very often, the personal finances of the main shareholders, business owners, are completely divided and do not correlate with corporate finances. The management of the company is unaware of the owner's personal finances and the opportunities that their presence opens up for attracting borrowed funds to the business. He uses expensive overdrafts, while for the strategy of shares and bonds on personal non-resident accounts of shareholders, you can take out a loan at 0.75% -0.5% in euros.

It is important to build a chain where the owner of the company and capital also earns on money in a non-resident field, and supports his business with liquidity when he needs short-term loans. With a dividend yield of 5-6% on a portfolio of stocks abroad, he receives virtually free money to lend to his business. Often this opportunity is not used by Ukrainian entrepreneurs, and the task of a financial advisor is to make it obvious to them and help them to use it effectively.

The investment process should be a closed loop in which one asset class could feed liquidity to another asset class

I am deeply convinced that an entrepreneur should look at his resource comprehensively and without reference to the investment object. The investment process should become a closed loop in which one asset class could feed liquidity to another asset class. In this process, it is necessary to build competent financial flows, excluding cash transfers and loans within the group, but using the funds and trusts of the owner, in which he keeps money, and the accounts of his private business structures.

With a well-designed investment return strategy, the stage of the economic and credit cycle is taken into account. You clearly understand when it is advisable to invest in stocks of companies in developed markets, and when - in your own private business.

The modern financial world is a world of unlimited opportunities, which you can take advantage of by learning to look comprehensively at personal finance and private business and reinforcing this with experience of working in different markets.