Assignment 3: Final Project

Funding the Business

Once you have finalized your team, the next concern for you is to determine how to fund your business. Funding is one of the fundamental problems with starting a new business. Where to find funding, how to access funding, and what will funding cost are some of the important issues that you should consider prior to spending a single cent on your project.

In case your bank account balance is pretty shallow, you need to look for outside funding. One of the easier possibilities is approaching family and friends. However, in most cases, they want to be repaid at some point, irrespective of the running status (profit or loss) of your business. This situation often leads to bad feelings and loss of friends. Other less-intrusive methods are:

• If you are a corporation, you can sell stock, keeping in mind you need financing for 51 percent of the total amount required.
• You can mortgage your house, providing there is enough equity in it.
• Locate an “angel investor,” keeping in mind it will, more than likely, want a big share of your business earnings.
• If you hold a sole proprietorship, you can contact a partner.
• Find a venture capitalist.

This week, you will identify all the funding options available to you. Answer the following questions in a 3- to 4-page Microsoft Word document:

• What is your estimate of the capital amount required for your business?
• What are the liabilities associated with your entity, and will these liabilities affect the funding requirement of your business?
• How will you determine that the source has enough capital?
• In case you approach an angel investor, a venture capitalist, or a lending institution, what are the possible requirements that the source will require you to fulfill in order to fund your business?
• In case you plan to sell stock, what are the sources from which you will find the money to purchase 51 percent of the share to retain the ownership of your business?
• In case you enter a partnership, what amount of money or assets will each partner need to invest and what will each partner receive for his or her contribution?

Based on your answers, analyze the funding options and identify the option you will prefer utilizing. Provide a rationale for your choice.