Chapter 10: Getting Financing or Funding

Reasons why Companies need funding Cash Flow Challenges, Capital Investments, Lengthy Product Development Cycles
Cash flow challenges Inventory purchases, Employees must be paid, and advertising must be paid for before cash is generated from sales.
Capital Investments Cost of buying real estate, building facilities, and purchasing equipment. Typically exceeds a firm’s ability to provide funds for these needs on its own.
Lengthy Product Developmental Cycles Some products are under development for years before they start generating profits.
Sources of personal financing Personal funds, friends and family, Bootstrapping
Personal funds personal funds that go into ventures
Sweat Equity represents the value of the time and effort that a founder puts into a new venture.
Friends and Famly Loans or investments from friends and family
Bootstrapping finding ways to avoid the need for external financing or funding through creativity, ingenuity, thriftiness, cost-cutting, or any means necessary.
Equity financing exchanging partial ownership of a firm, in return for funding.
Debt Financing getting a loan.
Business Angels individuals who invest their personal capital directly in start-ups.
Venture Capital money that is invested by venture capital firms in start-ups and small businesses with exceptional growth potential.
Initial Public Offering(IPO) First sale of stock to the public
Crowdfunding practice of funding a project or new venture by raising monetary contributions from a large number of people, typically via internet.
Rewards-based crowdfunding allows entrepreneurs to raise money in exchange for some type of amenity or reward.
equity- based crowdfunding raising money by tapping individuals who provide funding in exchange for equity in the business. JOBs act started this in april 2012.
lease 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.

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