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[DOCUMENT TITLE] Case Solution & Answer

[Document title] Case Solution

Question 1

Here is a brief description of the most popular and sought-after financing options and its pros and cons, to help the businesses in making informed decisions.(Glass, 2014).

Bootstrapping

A self-start involves an entrepreneur who leaves loans, stocks, or other traditional financing options and chooses to self-finance his or her business with personal savings or other available funds. This method is best suited for business ideas that do not require an extreme amount of capital to produce.

Pros:

  • Business leaders with full control, have full control over the business, from making decisions to implementing ideas.
  • Acquisition of key skills – The start-up program provides space for entrepreneurs to acquire basic skills, such as: management and the effective use of the available resources to promote the business development.
  • No profit sharing – a business that can survive on its own as long as it is making profit, which has huge benefits as it is not tied to stocks or loans.

Cons:

  • Not all businesses can be started – some businesses need large amounts of capital early on, and this large amount of capital may not be mandatory.
  • Slow business growth – when dealing with all parts of the business; there is also the concern that cash flow will in any case slow down the pace of the business growth.
  • The possibility of indebtedness – the business does not start making a profit immediately. Self-employed people may run out of resources and take on debt before they see growth.

Crowdfunding

Because, the latest technological developments have made it very easy to start a crowdfunding project, and because of its success over the years; it has become one of the most popular funding options.

With careful planning and execution, crowdfunding can be used as an effective fundraising method. Here are the main pros and cons to help you determine the best deal for you.

Pross:

  • No fee is charged – if the crowdfunding project fails, all the money raised will be repaid to the investors and the entrepreneur will win or lose nothing.
  • Contributes to marketing and brand visibility – successfully funded campaigns are already exposed before starting a business. Similarly, it brings good public relations.
  • Building a strong customer base – Successful participants in crowdfunding projects often look for loyal customers after starting a business.

Cons:

  • Crowdfunding is not very efficient for capital-intensive businesses. It works best when the amount required does not exceed $ 100,000.
  • A lot of marketing is needed – for a sport to be successful, a lot of marketing is needed for the sport to appear to a large audience, and this type of marketing is often very expensive.
  • Your ideas can be stolen – In the crowdfunding process, if your ideas are not properly protected by patents or copyrights, they can be stolen.
  • Failure could damage the brand’s reputation.

Venture Capital

This financing option usually involves ideas with good growth potential to convince the venture capitalists to provide a high return on the idea. Venture capital does not only provide resources but also provides advice and expert advice.

After funding an idea and providing support and assistance, venture capitalists get a return on their investment as the idea grows and its value increases.

Pros:

  • Advice and consulting – Venture capital companies usually have a team of experienced professionals who actively support human resources.
  • Active support – in addition to financing and advising; the venture capital company also provides legal, tax and similar support to the start-ups in which it invests.
  • Connection and network connection – the company can access the VC network and the professional connection.
  • No loans or interest repayments – Unlike loans, start-ups supported by the funds do not have to pay accrued interest. Instead, venture capitalists sold a few shares.

Cons:

  • Little control – the more money venture capital firms invest, the more control they get over the business.
  • Decentralized ownership – venture capital firms investing large amounts of capital can own 60% of the business. This gives them more authority as compared to the business owner.
  • The chances of getting financing are low – venture capitalists only invest in ideas that they consider most promising. Research has shown that every time a venture capitalist invests, about 400 ideas are considered.
  • Time Limit – Most venture capitalists only provide funds to the companies that are likely to recoup their investment within three to five years.

Angel Investment

Angel investors are successful entrepreneurs who want to finance the birth of a promising idea or help the business grow with expert advice and guidance.

Similar to the advantages and disadvantages of the venture capital; the main difference is that the angel investors tend to be successful people or rich networks, while venture capital is a business.

In addition, venture capital brings more resources to businesses than angel investors, and usually expects more equity. Another difference is that in the research mentioned in the pros and cons of the above venture capitalists; angel investors invest in 40 ideas out of 400 reviewed ideas.

Loan

Those who are unable to raise funds using any of the above methods, can take loan. When angel investors invest in capital ideas, loans are issued in installments and in the form of interest. The rules or interest rates vary depending on the type of loan issued and the general terms and conditions of the issuer.

Pros:

  • Personal loans are not guaranteed and cannot be verified – you don’t need a lot of documents, mortgages or collateral. In addition, the use of personal loans is not restricted.
  • Personal loans are easier to get and obtain – different platforms can provide personal loans quickly. Even with a poor credit score, there are platforms that help you in accessing financial services online in minutes.
  • No profit sharing or ownership – all profits and income from any form of credit belong exclusively to your business.
  • If the business goes bankrupt, the entrepreneur can liquidate the business to repay all or part of the loan.

Cons:

  • All loans show accrued interest and this interest can increase rapidly.

The process for applying for a bank loan is often complex and requires many details, such as mortgages…………………

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