Case Study on Able Planet: Finding Capital to Finance Innovation

This case study examines the challenges faced by Able Planet, a small company, in securing $1.5 million to finance its innovative new product. It addresses why entrepreneurs often struggle to raise capital between $100,000 and $3 million, highlighting the risks perceived by lenders and the importance of a coherent business plan. The solution suggests that Kevin Semcken, Able Planet's CEO, consider both debt and equity financing options, such as loans from banks and government agencies like the Small Business Administration, as well as raising capital through equity financing by selling shares to investors. Furthermore, it advises Semcken to prepare thoroughly before approaching potential lenders and investors by presenting proper documentation, a well-established business plan, cash flow projections, and financial statements to build trust and demonstrate the company's potential for success. Desklib provides a platform for students to access similar solved assignments and past papers.

Running head: CASE STUDY: HOW CAN A SMALL COMPANY FIND CAPITAL TO
FINANCE AN INNOVATIVE NEW PRODUCT 1
Case Study: How can a small company find capital to finance an innovative new product?
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CASE STUDY: HOW CAN A SMALL COMPANY FIND CAPITAL TO FINANCE AN
INNOVATIVE NEW PRODUCT 2
1. Experts say that entrepreneurs who need between $100,000 and $3 million often
face the greatest obstacles when raising capital for their businesses. Why?
Entrepreneurs find difficulties in raising large amount of money because they are not
certain on return of the investment. Most experts say that small business fail and this is in
line with Rivera, 2017 argument that more than 50 % of small businesses fail within the
first 5 years. Also, new entrepreneurs do not have historical data of sales that help to
ascertain that the business will survive. The lenders are therefore not guaranteed of
repayment of the loans. Nevertheless, most new entrepreneurs do not have coherent
business plan and this contribute to denial of lenders to fund the business. A business
plan should show the potentiality of the business by clearly defining the financial
forecast, list of competitors and a market research ( Grasshopper Team, 2010).
2. How should Kevin Semcken raise the $1.5 million in capital that Able Planet needs?
Be sure to consider sources of both debt and equity financing.
Mr. Semcken can raise the $ 1.5 million by borrowing the capital from both debt and
equity financing agencies (Rath, 2014). He can borrow loans from debt finance
institutions such as banks and government agencies which he will later return with
interest. Able company can shorten the term to less than one year as a means of
increasing chances for getting the loan easily. Small Business Administration is a debt
financing agent which can help him raise the capital. Also, Mr. Semcken can raise the
capital through equity financing. This involves obtaining money from investors by selling
shares (Kinyua, 2018). The investors may include friends and family members who raise
the funds and obtain shares from the company.

CASE STUDY: HOW CAN A SMALL COMPANY FIND CAPITAL TO FINANCE AN
INNOVATIVE NEW PRODUCT 3
3. Write a short memo to Kevin Semcken explaining what he should do before he
approaches potential lenders and investors to maximize his chances of getting the
capital that Able Planet needs.
Memo
From:
To: Kevin Semcken
Ways of Increasing Chances of Getting Capital from Lenders and Investors
Presenting proper documents that make the lenders that see you as a good risk taker will
increase your chances of getting the capital. Also, well established business plan with
ways in which you will use the money is also important. In addition, prepare a cash flow
projection that’s guarantee the lenders and investors that you will repay the loan.
Nevertheless, present your financial statement with lists of your assets, debts and past
business tax returns. This will built the trust of return of the loans

CASE STUDY: HOW CAN A SMALL COMPANY FIND CAPITAL TO FINANCE AN
INNOVATIVE NEW PRODUCT 4
References
Grasshopper Team. (2010, September 27). What Are Entrepreneurs’ Biggest Obstacles to
Getting Funded? Retrieved from Grasshopper: https://grasshopper.com/blog/what-are-
entrepreneurs-biggest-obstacles-to-getting-funded/
Kinyua, M. (2018, March 14). Tips on how to invest in stocks . Retrieved from Standard Digital:
https://www.standardmedia.co.ke/business/article/2001273165/so-you-want-to-invest-in-
stocks