You Be the Consultant: The Never-Ending Hunt for Financing (Case Study)
Q1. Which of the funding sources described in this chapter do you recommend that Kenneth Giddon and David and Lorri Jones consider for financing the growth of their businesses? Which sources do you recommend that they not use? Why?
The financing needs of these entrepreneurs are similar and assessments of these funding options follow:
1- Angel Investors: based on the right match between the business and the angel investor angel investors might be an attractive fit. (Potential)
2- Family and Friends: It might be a good source to consider to meet the needs of investment. This source is not recommended if the amount represents high risk. (Potential)
3- Federal or SBA Loans: After being rejected from a bank than this might be a possible source of funds. (Potential)
4- Venture Capital: This might be attractive if the right connections are there. (Potential)
5- Initial Public Offering: This requires a lot of work and capital and is not suitable at this time. (Not Recommended)
6- Asset based borrowing: If the business owns assets and are valued a greater amount than the investment needed, this may be a good source of funds. (Potential)
Q2. What can entrepreneurs do to increase the probability that bankers will approve their loan requests?
Many ways can be considered from Entrepreneurs to avoid common rejection reasons from banks:
1. Show that you have specific and detailed information about the business.
2. Being more specific demonstrating the main reasons requiring additional financing funds.
3. Create a well organized business plan and seek for feedback from other interested people.
4. Be more specific about the expected outcomes.
5. Develop a perfect business vision.
6. Describe the collateral or any other ways backing up the business loan.
Q3. Work with a team of your classmates to brainstorm ways that these entrepreneurs could attract the capital they need for their businesses. What steps would you recommend they take before they approach the potential sources of funding you have identified?
Steps to take before approaching potential sources of funding may include:
1. Focusing on the growth and expansion strategy.
2. Revise and update the business plan.
3. Develop emergency plans for different situations.
4. More clarity about the list of potential financial options.
5. Improve a growth strategy leading to a future business vision.