How Do You Obtain Your Start-Up Capital?

Start-Up Capital

How do you obtain your start-up capital? Identify at least three sources of your start-up capital. There are four types of loans available from banks for new ventures. Which type of loans would you prefer to borrow from banks? Explain why you prefer to borrow that particular type of loan. Respond to at least two of your classmates’ postings.

How do you obtain your start-up capital? Three sources of start-up capital for my new venture would include a line of credit from our bank, internal funds, and trade credit. We currently have a $100,000 line of credit established at the bank. This will probably need to be re-negotiated for a higher amount once we decide to initiate the newest branch of our business. The beauty of this type of loan is it can be instantaneously placed into the business and paid back over a short period of time. Internal funds are a great option as well. “Many (businesses) fail to consider that what they will make this year can be invested in the business to help meet expansion needs” (Kuratko & Hornsby, 2009, p.176). We were fortunate to have made a great profit from the last couple of years. These funds may be put back into a business to help it grow to a new level. The last option to consider is trade credit. Inventory purchased from our main supplier can be paid out over a 30 day period. It provides a chance of collecting the funds before they are needing to be paid. I personally do not like to be indebted. Any opportunities afforded that allow a quick turnaround payback would be ideal. Which type of loans would you prefer to borrow from banks? Explain why you prefer to borrow that particular type of loan. If my venture was needing a large sum of funds, the type of loan to consider would be a term loan. Ideally, it would be best to keep it at a shorter term such as the one to four year range. Our text states that it can be unsecured and paid back either monthly, quarterly, biannually, or annually. In addition, a large portion could be paid back at the end of the period (Kuratko & Hornsby, 2009). The key would be making sure the funds could be pigeon-holed and not needed for daily cash flow. Reference: Kuratko, D., Hornsby, J. (2009) New Venture Management. Upper Saddle River, NJ: Pearson Prentice Hall. ISBN: 9780136130321.