Financing a New Venture
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The paper looks at how this coffee shop will be financed by a combination of owner's equity and debt and describes how the debt financing is going to come from both credit card and revolving credit. The paper explains why this venture does not intend to accept government grants or guarantees as part of the capital structure and also explains the rationale behind the use of the chosen capital structure. The paper notes that there is no intent at present for the new venture to go public, and concludes by presenting the break-even analysis for the venture.
From the Paper:"The coffee shop will be financed by a combination of owner's equity and debt. The owners and their families will put up approximately 75% of the financing for the venture. A total of twelve investors will be involved. The majority of these investors will be silent partners. While silent, these partners will still be concerned with how their money has been invested (FamilyBusiness.co.uk, 2010). The silent partners will not have a voting share, but will receive updates on the business' progress. There will be three voting owners, the principles, each of whom will have a specific executive position within the corporate structure.
"Initially, the debt financing is going to come from both credit card and revolving credit. A local bank has extended a revolving credit facility to the ownership team that will allow for coverage of fluctuations associated with growth, primarily new investment and new hiring. The model will have the growth associated with the increased investment used to pay the revolving credit down. The credit card financing will come from the business credit card. Although this form of financing is expensive, it is presently necessary to ensure that the business can be fully funded."
Sample of Sources Used:
- FamilyBusiness.co.uk. (2010). Dealing with family members who are silent partners. Family Business.co.uk. Retrieved August 20, 2010 from http://www.afamilybusiness.co.uk/dealing-with-family-members-who-are-silent-partners.html
- Investopedia.com. (2010). Mezzanine financing. Investopedia.com. Retrieved August 20, 2010 from http://www.investopedia.com/terms/m/mezzaninefinancing.asp
- Richards, D. (2010). How to do a breakeven analysis. About.com. Retrieved August 20, 2010 from http://entrepreneurs.about.com/od/businessplan/a/breakeven.htm
Cite this Term Paper:
Financing a New Venture (2013, April 22) Retrieved October 16, 2019, from https://www.academon.com/term-paper/financing-a-new-venture-152725/
"Financing a New Venture" 22 April 2013. Web. 16 October. 2019. <https://www.academon.com/term-paper/financing-a-new-venture-152725/>