- Suppose you need $1 million dollars to start your Dream Business. Research ways to get the money for such a business. Compare two (2) sources of financing you might obtain. (e.g., Small Business Administration (SBA), private investors, private loans, personal assets, and / or personal credit cards.) Identify the risks and benefits of your two (2) choices.
Reply to Statement PART2
The two ways that I think are the best to get money for my business is Small Business Administration (SBA) and private investors. The first way, Small Business Administration is run by the government where the main part of this agency is to “Aid, counsel, assist and protect the interest of small business concerns”. Some benefits of the Small Business Administration is that people are able to provide a lower up-front equity and in turn receive a longer loan then with conventional commercial loans, and in recent years they increased the maximum loan amount from $1 million to $1.5 million. Some risks that are taken by business owners who go through the Small Business Administration is that there is more documentation required since the loans are directly funded by the lenders and backed by the government, also there are usually higher interest rates then if getting a loan from a traditional bank. The second way that I think is the best to receive money for a start-up business is through private investors. Some benefits of private loans are that the terms are more flexible such as the length, payment date, and loan amount that if you were going through a bank, another benefit is that you will have a better chance of getting a good interest rate since it is not going through a bank, rather a family member or friend. Risks that you take when getting a loan through private investor is that it could affect the relationship that you have with that investor if you have a disagreement, or if you are late or don’t make a payment, also there is not as much documentation with private investors then with a regular bank which could cause problems for you later on with that investor.