Experts say that entrepreneurs who need between $100,000 and $3 million often face the greatest obstacles when raising capital for their businesses. Why? These entrepreneurs find it hard to raise capital due to investors and banks are unaware of their product and or company because of the unfamiliarity of the new business. Since, they cannot show overwhelming profits to support their business it places a strain on the lenders to relinquish large amounts of money to the entrepreneurs.
Over the last several years, with the failing economy financial market have not been as strong as it was in prior years.
These intuitions and investors are not as flexible because they fear that the issuance of credit will not allow them a positive return on their investment. It is unsure if the business will be able to meet the needs of the consumer which will allow them to thrive and repay the terms of the agreement. Another reason for entrepreneurs to face obstacles in trying to find funding for their business is that they are sometime unfamiliar with gaining the needed skills and understanding of the process of dealing with investors and or banks.
To achieve higher success rates owners must make sure that they deliver their objectives as Lear and concise as possible.
2. How should Kevin Semen raise the $1. 5 million in capital that Able Planet needs? Be sure to consider sources of both debt and equity financing. Mr.. Semen has several options for obtaining financing.
If he is willing to utilize multiple options to gain the total amount he should be able to establish the whole 1. 5 million to meet his highest sales seasons. Partners: He has partners that he can go to.
Even though, they told him that he should put the project on hold he may be able to convince them to put a portion of the monies needed to bring the project to life. Angel Investors: His company has had some success with the current product so he should be able to go to wealthy friends or other friends that have companies that are making a profit. Corporate Venture Capital: These larger companies provide capital to smaller companies that have new and innovative products that they will be able to utilize.
Asset-Based Lenders: Since, he does have an established productive business he could go to the lenders and use his current assets as collateral. Purchase Order Loans: He can take this short term loan from his larger customers such as Cost and Walter. They use the purchase order for collateral for the loan. Small Business Investment Companies: “CBS operate like any other venture capital firm, but, unlike traditional venture capital firms, they use private capital and borrowed government funds to provide both debt and equity financing to small businesses. (Scarborough, 2012). 3.
Write a short memo to Kevin Semen explaining what he should do before he approaches potential lenders and investors to maximize his chances of getting the capital that Able Planet needs. (Please see attached) Memorandum To: Ken Semen From: Date: October 5, 2014 Subject: Maximizing Chances for Raising Capital Dear Mr.. Semen, In reviewing your need to raise capital for your future venture you have several option that will allow you to satisfy your financial goals.
Before moving forward, please review all of the options thoroughly to ensure that there is not a missed opportunity that we are unaware of. The two best options that may provide us the most stable and reliable form of funding is to address Corporate Venture Capitals and Small Business Investment Companies.
This way we will be able to maintain our focus and adhere to our two most profitable seasons. Make sure that you are knowledgeable of all the information that needs to be discussed and that it is clear to all that will peruse it.
You have to be prepared in order to gain the highest success rate. Like the product, you must remain innovative and cutting edge to appeal to the banks and investors. Also, continue to raise an appropriate amount of capital so that you do not have to approach them again to maintain a profitable revenue.