BUS313 – Introduction to Entrepreneurship

Startup funds refer to the money that is needed by the new business owner to start a new business. These funds can apply to building rent, equipment purchase, permits or any other item that requires money to begin a business (Staff, 2017). Startup funds is a term that incorporates all of the money that is necessary to get a company up and to run; the money the new owner needs to pay before making any money from the business itself.

Working capital the total amount of the company’s current assets minus the total current liabilities. It is the amount of money available for daily operation. Working capital is a measure of the money that a business must possess or have access to run the business in hopes of making a profit (Working, Capital). Simply stated the working capital is a measure of the financial health of the company (Avercamp, H).

Obtaining the necessary startup funds is crucial when starting a business. The startup plan for Lomati’S is five to seven years out so that capital will be saved and put aside for initial expenses. The first avenue that to intensely explore for beginning Lomati’S will be Government grants for small business owners and veterans. The next method of acquiring capital will be a small business loan from a small and local bank. The last avenue will be investors. Each is discussed in more detail below.

Government Grants

Government grants have been set up to aid veterans to start their small business. The main appeal of a government grant is that the money does not need to be paid back and it is not necessary to give up any equity in the business to obtain a grant. The most significant drawback to the government grants is the slow reward time and the extent of information required to receive the grant (Nicastro, 2018). Since Lomati’S has five to seven years before opening there is plenty of time to navigate the government red tape required for grants making this the most favorable option.

Small Business Loan from Community Banks

Obtaining a loan from a bank for a small business can be a difficult task due to the high failure rate of new businesses. A few options make it easier to obtain the loan; they include; initial capital invested by the owner, a few years in business showing a profit and a solid business plan. This method is the second most preferred method to obtain the funds to open Lomati’S because of the low-interest rates and not having to give up equity in the company (Pofeldt, 2015). See Figure 2 on page 7 for more information.

Investors

Investors are people or organizations that offer financial assistance to business owners for a share of the equity in the business or a percentage of future profits. The best feature of investors is that they usually share their experience, contacts, and wisdom along with the capital they are investing. The investor receives a portion of the company or the profits for their money. While they are invested in the success of the company it can be hard to adjust to having input on decisions made for the business. Some investors are silent partners, meaning they allow the owner to continue daily operations autonomously, while other require equal say in business affairs (Pefeldt, 2015). This is the last option Lomati’S will explore for startup and capital funding since giving up equity is not very desirable.

Tables

Table 1

How It Works (Example):

Using the working capital formula and the information above from Figure 1, we can calculate that XYZ Company’s working capital is:
 
$160,000 – $65,000 = $95,000

[InvestingAnswers Feature: Financial Statement Analysis For Beginners]

http://www.investinganswers.com/financial-dictionary/financial-statement-analysis/working-capital-869

Figure 2: Loan Options for Small Business Owners

(Senturia, 2015)