Question

PART 1

Find an article or video offering advice on choosing the best financing option for a business. Answer the following questions:

Which types of financing did they discuss?

What advice did they offer?

What information or data did the article suggest a business owner use to help decide on the best financing decisions?

Answer 1

Types of Financing they discuss :

The video discusses several types of startup funding options. It talks about the traditional bank and SBA loans, rollover for business startups (ROBS), home equity loans and lines of credit, credit cards,microloans, and peer-to-peer business loans.

The advice they offer :

Traditional bank and SBA loans are the slowest and most difficult ways to get money for a businessstartup. To qualify for a traditional loan, you will generally need a high net worth, real estate with equity.

The information or data the article suggest a business owner use to help decide on the best financing decisions is :

* Equity : With equity financing, investors fund a business with their own money, so it can be a good option for start-ups seeking a lump sum of cash. Equity financing can be particularly attractive because founders don’t have to worry about a repayment plan; investors simply take a risk on your company and hope it succeeds.

* Venture debt : Venture debt is like a traditional bank loan except that start-ups are unlikely to immediately have positive cash flows or assets that would secure a normal loan. Due to this increased risk, lenders will demand higher interest rates and the repayment of the debt in full at the end of a set term.

* Convertible debt : Convertible debt is similar to venture debt because it requires periodic interest payments and the debt must be paid off in full at the end of a set term. Therefore, there is no immediate decrease in ownership. However, if the debt is not paid back by the maturity date, under predefined terms, the lender can convert the debt to equity, making the lender a company shareholder.

* Convertible equity : Looking for flexible financing often look toward convertible equity. Similar to equity, convertible equity involves an investor putting his or her own money into the start-up with no guarantee of being repaid.