Ch 10 - CHAPTER 10 GETTING FUNDING OR FINANCING WHY THE...

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GETTING FUNDING OR FINANCING WHY THE NEED FOR FUNDING : (3) a. Cash Flow Challenges. Inventory must be purchased, employees trained and paid, and advertising must be paid for before sales generate cash b. Capital Investments - The cost of buying real estate, building facilities & equipment typically exceeds a firm’s ability to provide funds for these needs on its own. c. Lengthy Product Development Cycles – the upfront costs of product development often exceeds a firm’s ability to fund these activities on its own. SOURCES OF PERSONAL FINANCING: 1. Founders themselves - personal savings, mortgages, credit cards, etc 2. Friends and family – gifts, loans or investments (also, delayed compensation or reduced or free rent) 3. Bootstrapping - the use of creativity, ingenuity, and any means possible to obtain resources other than borrowing money or raising capital from traditional sources. PREPARING TO RAISE DEBT OR EQUITY FINANCING 1. Step 1: Determine precisely how much money is needed. (present & future needs) 2. Step 2: I.d. the most appropriate type of financing or funding. a. Equity financing means exchanging partial ownership in a firm, usually in the form of stock, for funding. b. Debt financing is getting a loan. 3. Step 3: Develop a strategy for engaging potential investors or bankers. levator speech -
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This note was uploaded on 03/28/2011 for the course MNGT 305 taught by Professor Chadwick during the Spring '11 term at Nicholls State.

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Ch 10 - CHAPTER 10 GETTING FUNDING OR FINANCING WHY THE...

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