Assignment 4: Final Business Plan

Running Head: BUSINESS PLAN

BUSINESS PLAN 2

18 Wheelers Business Plan

Yvonne Winn

Dr. Talil Abrhiem

November 22, 2020

Assignment 3: Startup Funds

Every startup business requires adequate funds to operate effectively. Startup funds are the money the company needs to launch a new business. These funds help the company to move from idea development to actual business. For instance, 18 Wheelers Company needs startup funds to buy trucks and other equipment, pay incorporation fees, and business license. On the other hand, working capital refers to money in the company that is available for daily operations. It indicates the difference between the company’s current assets and current liabilities (CFI, 2017). The knowledge of working capital is crucial when starting a new business as it shows a competitive position and the ability of the company to pay its expenses. For instance, a positive working capital indicates that the company is capable of servicing its short-term expenses, including paying suppliers and employees.

The company can obtain startup funds through different methods. These include debit and equity financing. Equity financing is a source of funding where the company exchanges a portion of ownership with money (Hofstrand, 2013). This type of funding allows the investor to share in the company’s profits and losses. Examples of equity financing include angel investors, venture capital, and equity offerings. Debt financing involves borrowing funds from creditors with a promise to pay back with interest within a specified period. According to Hofstrand (2013), debt borrowing can be long-term, short-term, secured, or unsecured, depending on the company’s needs. Some of the sources of debt financing include bonds, government programs, commercial lenders, and banks.

As a startup company, 18 Wheelers should consider personal savings and debt financing as the most appropriate start fund sources. The savings from the founders of the company can be used to increase working capital. Similarly, borrowing from banks and other creditors will allow the company to meet the expansion strategy of moving from a small delivery truck to a big truck.

References

CFI. (2017). Working Capital Formula. Retrieved from https://corporatefinanceinstitute.com/resources/knowledge/modeling/working-capital-formula/

Hofstrand, D. (2013). Types and Sources of Financing for Start-up Businesses. Retrieved from https://www.extension.iastate.edu/agdm/wholefarm/html/c5-92.html