Question

Imagine your attempt to receive venture capital has failed and you must look elsewhere. Ignoring some specific experience requirements, assess which alternative financing best fits a fashion boutique.

From the alternative financing you chose from the discussion above, indicate how this financier might likely approach evaluating a fashion boutique.

Answer 1

Fashion boutique can be funded through debt investment which are generally helpful for longer period and it will also provide with the related tax advantage.

Debt financing are incorporated with tax advantage also and it will provide multiple benefits as when the long term debt are obtained l. it will mean that the investor is looking for payment of debt through growth and profits.

Fashion boutique industry is a highly growth-oriented industry and I think that it can fund its debt payment with profit and it should not dilute equity with issuance of equity share capital in form of venture financing or Angel investors because they will also share the control and they will not allow to lose their own control on the company. So, in the initial stages, it is highly important to grow at a larger pace so debt financing would be most important as it will provide the growth prospective with tax advantage

As a financer, I would look for cash generating capability of the company rather than profit generation capability because at the initial stages cash is highly important for a company to survive .