Myself

Sources of Funds: Sources of Funds: Equity and Debt Equity and Debt

The “Secrets” to Successful Financing

1. Choosing the right sources of capital is a decision that will influence a company for a lifetime. 2. The money is out there; the key is knowing where to look. 3. Creativity counts. Entrepreneurs have to be as creative in their searches for capital as they are in developing their business ideas.

The “Secrets” to Successful Financing

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4. The World Wide Web puts at entrepreneur’s fingertips vast resources of information that can lead to financing. 5. Be thoroughly prepared before approaching lenders and investors. 6. Entrepreneurs should not underestimate the importance of making sure that the “chemistry” between themselves, their companies, and their funding sources is a good one.

Three Types of Capital

Capital is any form of wealth employed to produce more wealth for a firm.

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Fixed - used to purchase the permanent or fixed assets of the business (e.g., buildings, land, equipment, etc.) Working - used to support the small company’s normal short-term operations (e.g., buy inventory, pay bills, wages, salaries, etc.) Growth - used to help the small business expand or change its primary direction.

Equity Capital

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Represents the personal investment of the owner(s) in the business. Is called risk capital because investors assume the risk of losing their money if the business fails. Does not have to be repaid with interest like a loan does. Means that an entrepreneur must give up some ownership in the company to outside investors.

Sources of Equity Financing

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Personal savings n Friends and family members n Angels n Partners n Corporations n Venture capital companies n Public stock sale

Personal Savings

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The first place an entrepreneur should look for money. The most common source of equity capital for starting a business. Outside investors and lenders expect the entrepreneur to put...