Entreprenuer Small Business Mgmt

Topics: Debt, Venture capital, Loan Pages: 5 (1578 words) Published: January 21, 2015
Entreprenuer Small Business Mgmt
Able Planet Case 2
SBE-560-19660: Entrepreneurship/Small Business Mgmt.
Professor Wendy Finlay
October 5, 2013
Keller Graduate School of Management
Jacob Denise
Kevin Semcken, Able Planet’s CEO discovered Able Planet in Wheat Ridge, Colorado, that produces headphones with an imbedded magnetic coil to enhance sound quality at a technology conference in Denver Colorado. Kevin Semcken, who lost hearing in one ear, was intrigued and tested the product by listening to his favorite music. Kevin Semcken had a bigger vision for Able Planet. Kevin Semcken produced earphones that can fit into a person’s ear canal which would stay during strenuous activity and block-out ambient noise. He lined up thirty (30) potential customers who were interested in his innovated earphones, and convinced them to sign disclosure agreements. Kevin Semcken, Able Planet’s CEO and chairman is seeking capital to finance existing operations for its current products, build a prototype for a new product and market both products to new and current customers (Scarborough, 2012). Furthermore, the bank had changed the terms; Able Planet line of credit 2.5 million would no longer be financed by the bank for upfront cost of raw materials and manufacturing. Questions and Responses

Q1. Experts say that entrepreneurs who need between $100,000 and 3 million often face the greatest obstacles when raising capital for their businesses. Why?  Entrepreneurs find it very difficult to obtain a working capital between $100,000 and $3million because that is a large sum of money to obtain as a loan from any financial institution. All manner of persons being entrepreneurs, or businessmen are all in high demand for loans from financial institutions and therefore the banks find it much prudent to deal with already established businessmen and not an entrepreneur who is just about to enter into the business fray. For instance like Kevin Semcken who is a starter is of no different from the already existed struggling entrepreneurs who are just starting up their businesses. Banks try to shy away from these up and coming entrepreneurs and in this case makes them to rather shift their resources and investments into a more-established businesses. They tend to look for already grown companies buy stocks which remains the only available option for them as those companies look promising with good track records and fast-growth futures. Another reason could be that most of these entrepreneurs lack a well documented business plan. This doesn’t let them to establish trust for the lenders and investors from financing their businesses. Q2. How should Kevin Semcken raise the $1 5 million in capital that Able Planet needs? Be sure to consider sources of both debt and equity financing.  Well since Semcken already has his company up and running, I think the best way to raise money is to raise Venture Capital. Venuture Capitalist mostly raises money for existing companies that are looking to expand and grow. Venture Capitalist usually shy away from investing small amounts of capital into business and prefer investing $500,000 to millions into businesses.  Kevin Semcken needed a financial strategy to raise cash. “Where to find this seed money depends, in part, on the nature of the proposed business and on the amount of money required” (USHE Productions, n.d.). Kevin Semcken had traveled around the country going to fifteen (15) banks trying to get a loan, to avail no one would was interested in making one (Scarborough, 2012). At that time financial markets had all but slammed shut the lending window at most commercial banks. Kevin Semcken can use the debt financing which will allow him to borrow money that must be repaid over a period of time, usually with interest. Debt financing can be either short-term, with full repayment due in less than one year, or long-term, with repayment due over a period greater than one year. The lender does not gain an...

References: Scarborough, Norman M. (2012) Effective Business Management: An Entrepreneur Approach.
Upper Saddle River, NJ: Pearson Education Inc.
USHE Production. (n.d) ".Sources of Financing and Equity." Putting the Business Plan to Work.
Retrieved on October 5, 2013 Retrieved from: http://www.com/design/8020/downloads/4a.pdf‎
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