Individual project Essay

Andy Rexford has started a cottage industry in his garage for catering for the corner market. Soon that market grows and so does his clientele. With this fast pace growth in the business Andy has expanded his business from one stitch machine to hexad stitch machine in the short period of time. Recently, Andy has developed a business plan which clearly states the good future growth and split up of financing required. Andy does non have much money of his own to drape in the business, so he is looking for the impertinent financing sources.In this report, I will be discussing the different sources of external financing on with their wagess and drawbacks, and then I will be decided which source is the outgo for the Andys business. Sources of financing thither are respective(a) sources of financing the business and the most critical aspect is to understand which sources are divert for that particular business and how much finances do we needed. The assessment of sources is t otally judgmental. A grand with the judgment, it is also dependent on how willing he is to packet the information about his business and ownership with others.Sources of finances are split into 2 broad categories -Internal financing -External financing. Andys savings and income are already been exhausted in the process of growth, and he requires much financing. To help Andy to fuck off the decision wisely I will be discussing few external financing sources. External sources External financing includes ownership capital and non-ownership capital. These dickens categories are divided into other several categories. For the business like Andys following three non-ownership capital financing is suitable. edges Venture investors tenuous business association (SBA)Banks They are the financial institution who lends the money to the businesses and individuals and charges an amount of fire against it. They are the hardest place to find the finances as the trust does not grant the bring very easily but the time is been changing now bank has come up many different bestow schemes against which people are been given adds. A bank loan is considered as most desired mode of financing. People considered it as the most suitable because it is at times very speedy if you have good reference point standing in the market you give the gate get a loan in no time.Moreover, you can use that money in various ways and accountable for none. Although there are whatever advantages in acquire a loan from the bank but there are some disadvantages as well. Disadvantages like, some loans carry a pre payment plenty so the borrower could not pay the amount early (Scarborough, 2006). Venture investors Venture investors are those people who wealthy individuals, corpo enjoin and formal institutions who are willing to invest in the newly business and growing businesses.In return for providing the capital to the businesses, they comm that require a percentage of ownership in the company on with control over the strategic direction and payment assorted fees. occult equity provides capital and access to a ne bothrk that can translate a company into an industry player, Karen E. Klein noted in Business Week. nevertheless the price is mettlesome a chunk of your business. Like every other financing source, there are some advantages and disadvantages as well. The main advantage for the start-up business is that they are not obligated to repay the money.And the involvement of the high profile businessmen can also increase the credibility of new business. The main disadvantage an entrepreneur can have from the imagine investor is that they arrest the part owners of the business, and thus they have the rights have a say in the decisions. The business owner faces a dilution of their position as owners and possible exit of power of controlling the business (Scarborough, 2006). Small business association Small business association is the organizations in United States organize by the governing that helps the entrepreneurs to start up their business.Small business association acts as the guarantor of loans for the people who do not qualify for the commercial loans. The advantages related to the lowly business association are that since its a government formed organization to encourage the man of affairs, they are charging very low interest rate as in comparison to the commercial banks. SBA takes a very active decision regarding the approvals of loans to the people. There are many advantages attached to the SBA that fares it is desirable for the businessman but there is a gloomy side of this loan as well.Since its government loan no matter what happens to your business you have to pay off this loan before any other debt. Moreover, there is more paper work required than in commercial bank. The government wants to make sure that you are truly eligible for this particular loan or not. Andys source of financing Andy should opt for the ban k loan as it suits to the requirements of his business. Future of his business is very bright and there is a indorsement that his business will get double the size within following two years.So giving the ownership in his business would not be advisable if he wants to have all the profit, and he can have them as the matter of fact. As for the SBA, they have very long repayment schedule though the rate is a low but 20-30 years time period does not worth for that kind of loan. Since Andy only needs $700,000, which can be repaid within 2 years because the one-year profit of Andy is 750,000. He can easily pay off this loan with 2 years. Hence it is suitable for Andy to take the bank loan. Conclusion There are various sources of finances.Some financing can be do internally while some can be borrowed from others. In the caseful of Andy his earning is already been consumed in the expansion of the business. So it is suggested to him that he should take the bank loan because he does not need to give the ownership to the venture investors and does not need to give whole life to pay that loan. Bank loan will be the most desirable suggestion as Andy can pay this loan payoff this loan within two years. Moreover, he does not need to give any ownership to anyone.