Question

Essay Question # 1

• Explain the five Cs of Credit and discuss some pros and cons of each. Which do you believe is the most important and why? Explain the types of bankruptcy options business owners have. Conduct research to see which of the three kinds of bankruptcies are most common among small businesses?
• Compare and contrast the differences between personal services vs. e-commerce businesses. Then describe the growth stage during implementation of a market strategy by a small firm. How could this growth stage lead to either success or failure of your business your team selected, and why? (The growth stage is similar to the product life cycle)  

Answer 1

Credit analysis is governed by the “5 Cs:” character, capacity, condition, capital and collateral.

• Character: Lenders need to know the borrower and guarantors are honest and have integrity. Additionally, the lender needs to be confident the applicant has the background, education, industry knowledge and experience required to successfully operate the business. Lending institutions may require a certain amount of management and/or ownership experience. They will also ask about your licensing and whether or not you have a criminal record. Pros - help in evaluating the background of individual, cons- fake character certificate can be given by the individual

• Capacity (Cash flow): The lender wants to know that your business is able to repay the loan. The business should have sufficient cash flow to support its business expenses and debts comfortably while also providing principals’ salaries sufficient to support personal expenses and debts. Examining the payment history of current loans and expenses is an indicator of the borrower’s reliability to make loan payments. Pros - tells about the capability of the individual
• Condition: The lender will need to understand the condition of the business, the industry, and the economy, which is why it is important to work with a lender who understands the WCB industry. The lender will want to know if the current conditions of the business will continue, improve or deteriorate. Furthermore, the lender will want to know how the loan proceeds will be used- working capital, renovations, additional equipment, etc. Pros- tells about the economic background.
• Capital: Your lender will ask what personal investment you plan to make in the business. Not only does injecting capital decrease the chance of default, but contributing personal assets also indicates that you are willing to take a personal risk for the sake of your business; it shows that you have ‘skin in the game.’ pros-shows the personal investment of the individual in the projects.
• Collateral: A lender will consider the value of the business’ assets and the personal assets of the guarantors as a secondary source of repayment. Collateral is an important consideration, but its significance varies depending on the type of loan. A lender will be able to explain the types of collateral needed for your loan. Pros- create the security against the loan.

Capability is the most important According to me because it shows the capability of the individual against the loan and with the help of this we can analyse wether it can repay the loan or not and collateral is the secoundry.

The different types of bankruptcies are called “chapters” due to where they are in the U.S. Bankruptcy Code.

• Chapter 13: Adjustment of Debts for Individuals With Regular Income

• Chapter 7 Liquidation

• Chapter 11 Business Reorganization

These are the three most common bankruptcy in the small businesses

Differences between Traditional Commerce and E-commerce

There are major differences between traditional and e-commerce. Below are some of the fundamental differences

1.Exchange of Traditional and E-Commerce :

Traditional commerce focuses on the exchange of products and services through personal interactions and is therefore manual while e-commerce trading activities are online via the internet and can be considered automatic

2.Timing of Traditional Commerce and E-Commerce :

Traditional commerce is limited to time business hours mostly during the day while e-commerce is 24/7, it can be done anytime day and night

3.Physical Interaction in Traditional Commerce and E-Commerce :

Traditional commerce allows a buyer to be physical inspect goods and test out services before making a purchase. Conversely, with e-commerce, products and services are not examined physically.

4.Face to Face :

As far as consumer interactions are concerned, traditional commerce provides face to face. On the other hand, e-commerce can be termed as screen to face interaction.

5.Geographical location:

Traditional commerce is limited to a particular geographical location while e-commerce is global and has no physical limitation.

6.Platform in Traditional Commerce and E-Commerce:

With traditional commerce, there’s no uniform platform for information exchange. Contrariwise, e-commerce has a unique uniform platform for exchanging information

7.Business relationship:

Business relationships with conventional commerce is linear while with e-commerce it is end to end.

8.Marketing in Traditional Commerce and E-Commerce:

When it comes to marketing, traditional commerce takes on a one-way marketing approach. E-commerce, on the other hand, takes on a one on one marketing strategy.

9.Payment involved in Traditional Commerce and E-Commerce:

Modes of payment in traditional commerce include cash, cheques, and credit cards. With e-commerce, there’s electronic funds transfer, credit card numbers and more.

10.Delivery

Delivery of Good and services is instant with traditional commerce while e-commerce delivery takes some time.

11.Establishment of Traditional Commerce and E-Commerce:

It is difficult to establish and maintain standard practices in traditional commerce. However, with e-commerce, uniform strategies can be quickly established and maintained.

Growth/Survival Stage

If business has survived through the initial stages of the business lifecycle and is currently in its growth or survival stage. The business is consistently generating revenue from marketing and adding new customers. This recurring revenue will help pay for your operating expenses and open up new business opportunities. Currently, our business could be operating at a net loss or a healthy profit, but there will always be competition. This is a great time to fine-tune your business plan and implement proven methodologies, sales model, marketing model, and operations model before expanding your venture for the mass market.

This stage is where competitors are being attracted into the market with similar offerings. Pricing should be maintained as you enjoy increasing demand. Product or service quality needs to be maintained and additional features and support services may be added. Distribution channels can be added as demand increases and customers accept the product or service. Marketing should now be aimed at a broader audience.

This growth stage can make us either success or a failure because this stage is a survival stage where competitor will try to beat us in the market and try to cover or reduce our market share this is the only time when we have to perform our best to be in the market if we survived in this stage then we can be able to achieve a huge customers in this stage and can crate a strong foundation for our firm.