Finance 100 Week 9 Discussion

Suppose you need $1 million dollars to start your dream business. Describe two ways you would generate the funds needed to start such a business. Next, discuss any risks or benefits you should be aware of when gathering these funds. Provide examples to support your response

A business that requires about one million dollars to start must have been an idea for quite some time. It is very difficult to find someone who would loan you that kind of money to start a business and it, therefore, requires very smart strategies. There are two ways that I would use to generate funds for my business; investments and friends and family. I would start by researching the business I want to start then start pitching ideas to them. For friends and family, they could be in the form of loans to support me as I venture into entrepreneurship. Since they know me, I would look for friends and family members who are entrepreneurs, this way I would not only gain their support but also advice on how to manage my business. The pro with this is that there would be little or no interest rated when repaying the loan. Chances are that the money they loan me is not enough and it may require me to sell some of my assets and use my savings.

Starting such a business requires me to believe in myself and my potential. However, I cannot manage to raise that kind of money alone. My second option will be looking for investors who will support my business idea in exchange for shares. My business needs to show that it has the potential for growth just like any other small business. Angel investors have experience in entrepreneurship and could be looking for new businesses to invest in. For example, Mr. Z owns a chain of hotels but is looking for new businesses to invest in. He could connect me with their contact to boost the business. The risk of starting such a business is that people are not willing to support the idea unless it shows its potential or if it has not yet started. Pitching the idea to banks, family, friends, and investors need to be convincing them why they should invest in your business. If the business fails however, there could be a strained relationship between my friends and family and that is why contracts with well-outlined terms and conditions are necessary.