Funding a Business Venture1 - Funding a Business Venture 1...

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Funding a Business Venture 1 Funding a Business Venture Warren Synecky Introduction to Business / BUSN105-57 April 1 st , 2010
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2 Abstract There are three ways to fund the start up for your business. You can borrow money, sell stock in your company, or license the product. Each of these options has its advantages and disadvantages. When borrowing money you may borrow the funds from people you trust such as family and friends. Many times this will come at a lower interest rate making it more affordable. You can also borrow from a bank, but this will usually come with a higher cost as they interest rate will more than likely be higher. The disadvantages of borrowing the necessary funds are that you have to pay this debt back before you can start making a profit. Also if you borrow from a bank, the bank then has a claim to your business. If you choose to sell stock in the company there will be no interest associated and you have no debt to pay back. The downside to this type of funding is you are giving up partial ownership in your company and also giving up decision making as you will need to create a board of directors to vote on major decisions. Lastly you can license your product to outside companies. In doing this you would receive a share of the profit earned from the company. (Preising, 2010) The advantages of this method of funding are you do not need to be involved in the manufacturing, distribution, and other day-to-day runnings of a business in order to get your product on the market. These aspects will be handled by the firm you licensed your product to. The disadvantages are you would lose control over your product. ( Coopers &. Lybrand, 2004).
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This note was uploaded on 04/02/2011 for the course BUSN 105 taught by Professor Markw.preising during the Fall '10 term at American InterContinental University.

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Funding a Business Venture1 - Funding a Business Venture 1...

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