Elite Personal Training

Topics: Debt, Finance, Real estate Pages: 2 (415 words) Published: September 13, 2012
Case: Harvard Business Review Harmonic Hearing Co.

It seems that Harriet Burns and Richard Irvine both have extensive knowledge about the business, its profitability, and the potential it has. It also seems that the most difficult part for them is in the financing. In looking at Equity and Debt financing there appears to be both advantages and disadvantages.

As far as equity is concerned, there are no large loan payments back to banks, organizations or individuals. There is no burden of debt when starting the business. Also, investors will have a complete understanding that there is risk and if failure they do not get their money back. Lastly, depending on the investors, they can offer valuable business assistance. The disadvantages are that the investors actually own a piece of the business, depending on how much they invest. They also will expect a share of the profits.

Debt financing is more for those who want total control of their business themselves. By tapping into their own sources of funds first, by using personal loans, home equity loans, etc. There are no investors or partners to answer to and the decision -making is solely up to the business owner. Also, if financing the business using debt, the interest is tax deductible, and the lender that you borrow money from does not share in the profits. The disadvantage to this is that borrowing money and not paying it back in a timely manner can ruin credit, which in turn makes it difficult down the road for future borrowing. So, there is concern with bankruptcy with this type of financing.

With regard to Harriet and Richard, it appears that they would have enough to finance on their own, given the amount market value on their assets and personal funds. In looking at Harrison’s proposal and Fowler’s, in my opinion, I would go with Joe Fowler’s. There would not be complete ownership, but the costs would be significantly lower and allow them to launch the new hearing aid. Harriet...
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