Financing a Business

A key requirement of establishing a dream business is the source of finance. With a budget of $1 million, I will need to take action aimed at seeking different means to acquire financing. Among the sources to consider are bank loans and seed investments. 

Bank loans are among the most common sources of finance for start-up companies. This involves taking up financing from one or more banking institutions. The main advantage of this source of financing is the ability to secure large amounts of capital that has favorable terms in reference to repayment periods (Calopa, Horvat, & Lalic, 2014). However, start-up entrepreneurs tend to steer away from this source of finance. Among the reasons for this are the complex procedures required and tough conditions associated with bank loans such as credit history and the need for security, which discourages young entrepreneurs from taking up business loans.

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The second option that I could use is seed investment. This offers initial investment to assist start-up companies in establishing and expanding the business. As a start-up company with a technological aspect, there is a rapid growth potential pertaining to the nature of the business. This source of financing attracts private investors with diverse capabilities in terms of capital to invest in the business (Calopa, Horvat, & Lalic, & 2014). Seed investments are applicable in the early stages of development of start-ups. A key benefit of this is that at such a young stage as a founder, I will have the capability to meet directly with the investors and share the dream. The risk involved in this source of financing is that investors consider early-stage ventures such as having a high rate of failure. This might cause a reduction in the amount that the investors might be willing to offer. The source of financing also comes with dilution ownership since the investors exchange the capital for shares in the business. 

ReferencesKlačmer Čalopa, M., Horvat, J., & Lalić, M. (2014). Analysis of financing sources for start-up companies. Management: Journal of contemporary management issues19(2), 19-44.

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