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Business Ventures Assignment PDF

   

Added on  2021-05-31

12 Pages3125 Words33 Views
Running head: NEW BUSINESS VENTURES1Business VenturesNameAffiliate Institution

Running head: NEW BUSINESS VENTURES2Table of ContentsExecutive summary....................................................................................................................................2Introduction................................................................................................................................................2Sources of Capital......................................................................................................................................3Challenges Facing New Ventures..............................................................................................................4Conclusion.................................................................................................................................................9References................................................................................................................................................10

Running head: NEW BUSINESS VENTURES3Executive summarySmall and medium-size businesses are the backbone of an economy. They provide a living for the members of the middle class, which are the majority. The starting of a new venture is riddled with challenges, legal, technological, political, economic, environmental, social and cultural challenges. Politicians talk of making legislation that would promote the emergence of new ventures and providingpublic financing for those small businesses. The risks faced by small business are avoidable by insurance, yet the premiums are too high and equity finance is growing thinner while debt finance is difficult and expensive to repay back. It is the duty of the government to provide a favourable environment for businesses and alternative affordable financing to debt financing.This paper intends to discuss the sources of finance for small emerging businesses, the challenges and the risks they face and possible solutions for those problems.IntroductionA business venture is a small business invested in by one or more individuals (backers) with the hope of proving financial gain for all the backers. They usually spring up due to a demand for a particular product or a gap in the supply in the market. New business ventures need financing because they are too small to raise enough capital for upfront payment. As a result, many promising business ideas have met a dead end and came to a sad ending due to insufficient funds.Starting a new business is not just having a good idea, there are start-up costs. Start-up costs arethe costs sustained in starting a new business. It may be different for every industry, but some of the common ones are as follows; security deposits for example lease deposits and utility deposits, machinery and paraphernalia, offices, inventory, advertising costs, working capital and unpredicted

Running head: NEW BUSINESS VENTURES4costs. Once the costs are established, the next step is to find the funding for those costs. Businesses acquire funding in different ways, but those entire sources can classified into two major categories, debtfinancing and equity financing.Sources of Capital Bank loansCommercial banks are always offering credit to small business (Ghosh and Moon 2010, p. 568).They can offer short-term loans like lines of credit or long-term loans such as installment loans. When offering the loans, the banks consider provisions such as how favorable the market is to the business, the valuation of the collateral, credit records, the capability of the business to compensate the loan, the entrepreneurship capabilities of the business owner and surely the current economic situation with the country.Government funding programsThe government has a range of funding plans for small businesses, these vary from grants, venture capitals to soft loans. The government offer favorable playing field for the new ventures by offering tax incentive and guarantee schemes (Jung, Cho and Roberts 2015). The objectives of these financial assistance are to help small business improve their workforce, improve their technology, promote their product and to repay their loans.According to Lally and Prasad (2014), other sources of finance for new ventures come from finance companies like American Express or Wells Cargo, which offer alternative funding should a loanapplication fail. They are mainly interested in high-risk opportunities in order to charge higher interest rates for their loans. But to their credit, some industries would not even exist without the help of finance companies (Wilson, 2010).

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