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?
ANSWER
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?
ANSWER:
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?
ANSWER:
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.