Assignment 4: Final Business Plan
Ball1981_99
BUS313.docx
Name: Terrance Winston
Professor: Talil Abrhiem
Course: BUS 313: Introduction to Entrepreneurship
Date: November 18, 2019
Startup capital is the money needed to start a new business. Startup capital might be needed to pay for office space, permits, licenses, inventory, product development, manufacturing, marketing, or any other expense that results from starting a new business. Debt capital is when your business takes out a loan for its startup capital. The loan is given for a set amount of time and then it must be paid back with interest and possibly other fees. Startup capital may be provided by venture capitalists, angel investors, or traditional banks. In any case, the entrepreneur who seeks startup capital generally has to create a solid business plan or build a prototype in order to sell the idea.
Startup capital is used to pay for any or all of the required expenses of creating a new business, including initial hires, office space, permits, licenses, inventory, research and market testing, product manufacturing, marketing, or any other expense. The benefit of debt capital is that the owner retains full control of the company. The drawback is hefty repayment.
Equity capital is funding that's provided by people or companies who want to own a piece of your company. Those people fund your business in the initial stages in trade for ownership of a portion of your company. They benefit when your company is successful, goes public, or is bought by a larger company. The benefit of equity capital is that there's no loan repayment. The drawback is that the owner loses control over a percentage of his company. A business can choose to obtain startup capital in any of these ways, but some may be more beneficial than others, depending on the type of business. It's very common that new businesses receive startup capital from their friends and family. This is a very easy way to receive funds, but there can be many drawbacks.
Banks provide startup capital in the form of business loans. That is the traditional way to fund a new business. Its biggest drawback is that the entrepreneur is required to begin payments of debt plus interest at a time when the venture might not yet have become profitable.
Venture capital from a single investor or a group of investors is one alternative. Generally, the successful applicant hands over a share of the company in return for funding. The agreement between the venture capital provider and the entrepreneur outlines a number of possible scenarios, such as an initial public offering or a buyout by a larger company, and defines how the investors will benefit from each.
