Description
Sources and Uses of Business Financing
Purpose of Assignment
The purpose of this assignment is for students to access the U.S. Small Business Administration (SBA) website for the purpose of discovering various sources of financing for their proposed business. Also, the mix of equity and debt financing should be considered. Students will also grasp the single most important thing about managing to maximize firm value which is to pursue excellence in the creation, production, and delivery of the firm's products and/or services.
Assignment Steps
Resource: The U.S. Small Business Administration (SBA) website is perhaps the most valuable resource for any new entrepreneur in America for all aspects of starting, operating, and growing a business, and it would help the students in this class to use like a handbook. It is especially useful in learning more about financing a business and obtaining a loan.
Assess stages of financing in a minimum 1,400 words which includes the following:
- Explain the different stages of financing.
- Analyze sources of financing through the lifecycle of a firm.
- Assess the trade-offs between debt and equity financing for an entrepreneur
APA format
Explanation & Answer
Attached.
Answer outline to BUSINESS FINANCING
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Discussion of stages
Tradeoffs between equity and debt financing
Running head: BUSINESS FINANCING
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Business Financing
Name
Institutional affiliation
BUSINESS FINANCING
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Financing stages
Financing is an essential element for any business whether a startup or an already established
enterprise. For a business to pursue its financial obligations, it has to get the necessary funding
that best fits its business structure. There are different types of funding to a business categorized
into debt and equity funding. There are different stages to financing a startup as it moves through
the course of its business life.
1. Seed financing
The seed phase also is known as the concept phase, involves the proving of a business idea
through testing its viability. At this stage, the research may be completed, but its commercial
capabilities are not yet tested and proven. At this stage, the entrepreneur requires small amounts
of capital financing to conduct the feasibility of the business idea, develop prototypes, protection
of intellectual property, access the market potential and evaluate all other aspects of the idea
(Hofstrand, 2014). In most cases, the funding of the seed stage comes from the entrepreneur’s
savings or cash raised from family and friends. Even though the risks at this stage are high, there
are financial bodies that accept an application for seed funding such as Y Combinator, thus
allowing the entrepreneur to have a demo of the business idea to the major investors (Hofstrand,
2014). At the end of the seed stage, the entrepreneur makes the decision on whether to move
forward with the business idea or to forego the idea.
Prelaunch financing stage
This stage occurs when the entrepreneur makes the decision to move forward with the idea. It is
at this stage that the foundation of the business is established. A detailed bu...
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