MANAGING FINANCIAL RESOURCES AND DECISIONS
MONT ROSE COLLEGE
4 – Business Finance
1 - Managing Financial Resources and Decisions
Grigor Petrov Grigorov
1.1 Identify the sources of finance available to a business. There are a number of sources that are available for the businessmen for ensuring that the profits of the business soar. It is important that the selection and choice is taken by critically analyzing the situation. Bank Loan: This the most common type of financing that is used by businesses. This helps the business in obtaining funds initially for the business and also ensures the business gains profit. It is important for the businessman to consider as to how much he will have to pay to return the money to the bank and this amount should not be more than the business would actually earn with the help of this loan1. Home Equity Line of Credit: in case the businessman owns a home, he has an option to obtain a home equity line of credit. This loan is granted to the people equal to the amount that they have invested in their home. With this, the person will be able to acquire more funds for the business. Find an Investor: With the help of an investor, the businessman will be able to finance his business in an effective and profitable business and will also help it to grow and expand. With the help of this, the businessman will be able to make his business a success. Your Own Money: When starting a business, the businessman’s first priority is that he is able to invest his own money in his business. In this manner, he avoids the risk of default and in case the business fails, he does not have anyone to payback. Venture capital:financial capital provided to early-stage,high-potencial,high risk,growth start –up companies.The venture capital fund makes money by owning equity in the companies it invests in. the typical venture capital investment occurs after the seed funding round as “growth funding”.The interest is to generate a return through an eventual realization event,such as an Initial Public Offering or trade sale of the company.
1.2 Assess the implications of the different sources.
Bank Loan: When obtaining a bank loan, the first aspect that the businessman will have to consider is the costs related to the borrowing of money. This helps the businessman to make sure that he does not have to pay more than he earns from his business. Home Equity Line of Credit: With the help of this type of loan, the businessman will be able to acquire funds according to his requirements and will also be able to ensure that the right amount is invested and earned in the business. Find an Investor: Finding external sources of investing will prove to be effective for the business only if the business is using the funds in an effective manner. The return that the investor will demand will have to paid by the person who is starting the business; however, the amount that will be agreed upon should not be more than the profits that the businessman will earn from his business. Your Own Money: With this, the investor will make sure that he works in a manner in which he is able to earn more according to his own investment and that his business is not impacted adversely. This will help the business in reaching new heights2. Venture capital: source of finance ,suitable for companies which prefer to invest in “entrepreneurial businesses”.This does not necessarily mean small or new businesses.Rather ,it is more about the investment’s aspirations and potential for growth,rather than by current size. Such businesses are aiming to grow rapidly to a significant size. As a rule of thumb,unless a business can offer the prospect of significiant turnover growth within five years,it is...
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