Funding/Business Supports (Sources of Personal Financing (Bootstrapping …
Creative Sources of Financing or Funding
A lease is a written agreement in which the owner of a piece of property allows an individual or business to use the property for a specified period of time in exchange for payments.
Strategic partners are another source of capital for new ventures.
Many partnerships are formed to share the costs of product or service development, to gain access to particular resources, or to facilitate speed to market.
Debt Financing - Commercial Banks
Historically, commercial banks have not been viewed as a practical source of financing for start-up firms.
Other Sources of Debt Financing
A form of raising money that takes place, usually via the Internet, where people pool their money to support a start-up or other initiative, usually in return for some sort of amenity rather than loan.
Is a financial transaction that occurs directly between individuals or peers.
Is a financial transaction whereby a business sells its accounts receivable to a third party, called a factor, at a discount in exchange for cash.
Also known as trade credit, is when a vendor extends credit to a business in order to allow the business to buy its products and/or services up front but defer payment until later.
Initial Public Offering
An initial public offering (IPO) is a company’s first sale of stock to the public. When a company goes public, its stock is traded on one of the major stock exchanges.
Reasons that Motivate Firms to Go Public
Creates a form of currency that can be used to grow the company via acquisitions.
Is a liquidity event that provides a means for a company’s investors to recoup their investments.
Raises a firm’s public profile, making it easier to attract high-quality customers and business partners.
Is a way to raise equity capital to fund current and future operations.
Is money that is invested by venture capital firms in start-ups and small businesses with exceptional growth potential.
firms fund very few entrepreneurial firms in comparison to business angels.
-they Are individuals who invest their personal capital directly in start-ups.
-Business angels are valuable because of their willingness to make relatively small investments.
-Business angels are difficult to find.
Sources of Personal Financing
A third source of seed money for a new venture is referred to as bootstrapping.
Bootstrapping is finding ways to avoid the need for external financing or funding through creativity, ingenuity, thriftiness, cost cutting, or any means necessary.
Many entrepreneurs bootstrap out of necessity.
Friends and Family
Friends and family are the second source of funds for many new ventures.
The vast majority of founders contribute personal funds, along with sweat equity, to their ventures.
Sweat equity represents the value of the time and effort that a founder puts into a new venture.
The Importance of Getting Financing or Funding
The nature of the funding and financing process is few people raising investment capital until they need to raise capital for their own finance.
There are three reasons that most new venture need to raise money during their early live
3-Lengthy product development cycles
Some products are under developments for years before generate earnings, the upfront costs often exceed a firm's ability to fund these activities on its own
The cost of buying real estate , building and typically exceeds , a firm's ability to provide fund for this needs on its own.
1- Cash Flow challenges:
Many things must be paid before cash is generated from sales such as employees training and advertising