Arthur Shorin's Offer

Question One

I agree with Jacquii Rosshandler’s friends, she should reject Arthur Shorin’s offer. As an alternative to taking Shorin’s $250k offer and loosing 75 percent of her business, I would suggest she explore loan options offered by the U.S. Small Business Administration (SBA). The SBA can help small businesses received loans from banks that might otherwise refuse due to the unsecured risk involved. Cornwall and Scarborough point out that, “An SBA guarantee to insure the business loan is another avenue to make a small business bankable” (Cornwall & Scarborough, 2015, p.555). One such program is the SBA Express Loan. This program will help businesses receive bank loans up to $350k, within 36 hours, interest not to exceed 6.5 percent
When an entrepreneur seeks out a loan from a financial institution they incur debt. This means that they must repay the loan with interest. This also means that they must make agreed upon scheduled payments. Due to this repayment agreement, the company’s available capital will be reduced resulting in less available capital to reinvest into the company. And of course there is always the risk of repayment failure which can result in foreclosure or bankruptcy. If the entrepreneur seeks out investors and trades equity for capital, they give up sole ownership of the company. This means they are not able to make decisions for the company without consulting with the other investor owners. Another disadvantage of this type of capital is that unlike debt capital, it doesn’t have a repayment timeline (Small Business Chron, n.d.). This means that in the end, the entrepreneur will relinquish much more personal earnings then with debt
I would appear that “2 Steps to Kissable Breath” was well received although the sales volume was very small due to the lack of market exposure. It would appear that her idea has promise and if she could raise the needed capital, could hit the markets and sales levels she is seeking. Shorin is only offering $250k for 75 percent of Jacquii, LLC. This seems like a small amount of money for such a large controlling portion of the company. It would also appear that Rosshandler hasn’t explored any other capital options. If the company is able to achieve widespread distribution, with retained ownership of merely 35 percent, she will be giving up substantial earnings and any real decision making authority within the company that she created. She should explore other options and definitely provide Arthur Shorin with a much lower counter