Getting Financing Presentation
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getting_financing_presentation.pptxGetting Financing Presentation
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Getting Financing Presentation
Funding for Entrepreneurial Ventures
Equity Financing and Debt Financing
Steps for Selecting Financing Alternative
Advantage and Disadvantage of Financing Alternative
Once the entrepreneur identifies the opportunity they must determine how they will fund this new venture. Equity and debt financing are the two financial options the entrepreneur can select from to finance there new venture. After selecting the financing alternative the advantages and disadvantages of each financing option need to be reviewed so the best option can be determined.
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Equity Financing
Equity is Cash Paid into the Business
Equity investments are certified by issuing shares
Business Paid for Shares
Equity financing is one financing option where the business sells shares in order to fund the new venture. In other words the entrepreneur can have investors provide money for a portion of the shares of the new investment (Garber, 1997). The entrepreneur receives money and once the venture makes money investors will also receive a share of the profits.
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Debt Financing
Loan from Lending Institution
No Business Relations once Debt Paid
Interest Tax Deductible
Short Term or Long Term Loans
Debt financing is just that, going into debt in order to take a risk that the new venture will be a success. The entrepreneur will get loan from a bank or some other lending institution but the ban does not become a business partner instead once the debt is paid the business relationship is severed. While the entrepreneur is responsible for paying interest the interest is tax deductible. The terms of the loan will differ with some being long term loans and others short term.
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Steps for Selecting Financing Alternatives
Determine amount of money Needed
Identify Financing Alternatives
Develop Strategy for Identifying Investors or Bankers
Once an entrepreneur identifies a project they will need to determine what amount of money will be needed to get the venture off the ground. There are several different financing alternatives to choose from that will consist of either equity or debt financing. Once the best financing alternative has been selected a strategy must be developed to identify potential investors or financial lenders to borrow the money.
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Advantages and Disadvantages of Corporate and Private Venture Capital
Provides Capital
No Obligation to Payback Investment
Investors Increase Credibility
Entrepreneur must give up part of business
Corporate and private venture capital is money provided to an entrepreneur that wants to make a new venture a business. The money the entrepreneur receives does not have to be paid back which is an advantage and if the money is received from a well known investor the new business can increase their credibility (Cumming, 2010). The disadvantage of receiving money from a private investor or corporate investor is the entrepreneur loses a portion of their business and in case will lose their autonomy.
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Advantages and Disadvantages of Angel and Debt Financing
Angel investors are private funders
Beneficial for Small businesses
Loss of Capital
Debt Financing is a Loan
Company in Debt
Angel investors are private investors that give entrepreneurs money in exchange for a percentage of the business. They are similar to the private investor but these investors are informal and usually invest in the small business. The advantage of the angel investor is the business receives the money they need to start the venture without risking any money but they entrepreneur risks losing a percentage of the business as in the private and corporate. Debt financing is a loan for the money needed to start the venture. The advantage is the entrepreneur has the money they need and do not lose any part of the business if the debt is paid back with interest. If the debt is not paid back they could lose the entire business not just a portion and secondly the company begins in debt.
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Appropriate Stage for Entrepreneurial Process
Step Three
Determination of the Required Resources
Resources equals Financing
The entrepreneurial process is the process involved in starting a new venture (Kuratko, 2008). The stage that is most appropriate for equity financing and debt financing is the third step. The third step is determining the required sources. What this means is they entrepreneur will need to locate the money to ensure the new venture can be funded. The resources refers to the financing that will be used to fund the new venture.
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References
Garber, C. (1997) Private Investment as a Financing Source for Microcredit. The North-South Center, University of Miami.
Cumming, D. (2010). Venture Capital: Investment Strategies, Structures, and Policies. New Jersey: John Wiley and Sons.
Kuratko, D. F. & Hodgetts, M. R. (2008). Entrepreneurship: Theory, Process, and Practice. New York: Cengage Learning.
