Introduction and Conclusion for this essay ?
Adequate financing is crucial for any business to turn an initial idea into something tangible and attract investment opportunities. In this case, Rosshandler does have some options. She can seek funding from her inner circle of family and friends before expanding her horizon to other investors. If possible, Jacquii, LLC can undergo bootstrapping and work to build quickly enough and make money without the aid of investors who may come in and expect to take some charge from the owner (Khwaja, n.d.). She may pursue a business grant or loan from financial institutions offered at low-interest rates because of the government's guarantee. Another option could be angel investors which is a network that would also come in handy with the amount of investment she requires.
She can also consider bartering where she exchanges her products as a cash substitute, for instance, trading free office space as the property manager on behalf of the owner. She can also form a partnership with a more established company that is interested and willing to advance funding and help develop her product. Some customers may be willing to cover Jacquii LLC development costs and buy the product before anyone else but, in turn, control the production process. It could be a potential funding opportunity for Rosshandler that would meet her needs.
Equity capital is the private investor money obtained in exchange for a share of ownership in the business. Equity financing is less risky financially because there is no payment afterwards even if the enterprise fails, thus a good option for those who cannot afford a loan ("Debt vs. Equity Financing: Which Is the Best Way for Your Business to Access Capital? | NFIB," 2009). One can tap into the investor's network, thus enhancing business credibility. Investors consider this transaction a long-term deal thus they do not expect immediate returns on their investment. Profits will be unused in repayment of loans repayment, but more cash will be available for business expansion.
However, equity financing takes much effort and time to find a suitable investor for your business. It may also require greater returns compared to those you would pay for a bank loan. The investor will need control of a certain percentage of business ownership and profits, for some that may be much to give up. There also must be consultations with investors before making any decisions, which may lead to disagreements or business termination in the case of irreconcilable differences.
Debt capital involves long-term loans from banks, which neither decide the running of the enterprise nor have ownership in the same. The relationship also ends on the completion of payment. Loans can be short-term or long-term depending on the terms set, and the interest is subject to tax deductions. Debt financing also offers the creation of plans in a budget since there is knowledge of the principal amount and interest.
However, the debt payment must be within a given timeframe, and overreliance on debt financing with cash flow problems could be troublesome in repayment. Moreover, extensive debts are considered "high risk" to potential investors, which can limit future ability to raise capital through equity financing. When sales take a dip during hard times, it can also leave the business vulnerable. Debt makes it difficult for a company to grow because of the high cost of loan repayment. The business assets may be collateral to the lender; therefore, the business owner has to guarantee debt or loan repayment.
Poor business practices can place the business's cash flow at risk despite active negotiations with suppliers and customers. However, there are solutions to deal with such a menacing issue. In a business like Rosshandler's, she should have run credit checks on clients to ensure they able and trustworthy to make payments on time. Measuring production efficiency, as well as the quantity and quality of the stock she holds, would be important to producing and meeting all orders. An effective marketing strategy would have helped when sales started stagnating or falling ("How to avoid problems in your cashflow | nibusinessinfo.co.uk," n.d.). Also, a fast way of accepting orders such as email, social media or over the phone would have improved sales and payment processes.
Jacqui Rosshandler should not accept the investment offer from Arthur Shorin. She sacrificed a lot of time and money creating her business. Taking the deal would bring to an end her goal of entirely owning a business and working for herself. Also, as a minority shareholder, she would have significantly less influence in the venture. Her financial returns would be minimal compared to those Shorin would acquire. As the industry grows, the prior valuation would no longer make sense, and Rosshandler will have encountered a rip-off. Therefore, she has to decline giving up any ownership in her business, and seek alternative methods of funding