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Paper Topic:


Business Financing

The business I am starting , over the internet at the moment , is a personalized gift basket store . This is a business venture with my cousin who is also into the same field as I am , graphic design . Although we already have a running website , somehow , we are still planning to put up a store in a huge mall to make the business grow even further Currently , the only financing option that we have , other than using our own money , is to borrow from a relative

Small businesses such as ours

are mostly privately funded , either from personal savings or borrowing from relatives and friends , since banks tend to approve big loans more . Other than that , it seems much easier to borrow from known people . However , although this may seem to be the safest and simplest way to source funds for a business , there are still some risks that are associated with this action . Just like what Brown (2005 ) said , Borrowing from family or friends can provide ready cash easier terms , and a longer repayment period than traditional sources of debt financing . However , you run the risk of straining family ties . If you do not repay the loan within a reasonable amount of time , you could lose the trust of your family and friends

Some people believe that doing business with a relative or even a close friend is not recommended . Even if they are not part of the business as owners , borrowing money from them to use for the business still makes them involved in it . Businesses are not always on the up side and problems are inevitable . These problems can lead to conflicts among those involved in the business , including relatives and friends . When these conflicts are not resolved immediately , the relationships with the relatives can be tarnished and it can go on for a long time . Therefore when choosing to involve relatives or friends in a business venture everything should remain at the professional level and the business should not interfere with the personal relationship

Other than borrowing from relatives , there are other financing options available . When companies need to raise money to invest in growth and development , they can issue stock or sell bonds ( Bonds : Financing the Future ' 2006 . However , financing options such as these also involved some risks . When companies issue stocks , they are decreasing the shares each of their current investors have . When they issue stocks they may need to issue it for a lesser price than its original value depending on the rate the business is going . Selling bonds have similar risks involved . When the business does not go well , the investors who bought the bonds may ask for a repayment higher than what the company expects . These options may also cause bankruptcy when the business does not perform very well

Looking for venture capitalists to invest in the business also has its own share of risks . First of all , these venture capitalists are people or companies who invest big time . If...

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