Andy Rexford has started a bungalow industry in his garage for providing for the niche market. Soon that market grows and so does his concern. With this fast gait growing in the concern Andy has expanded his concern from one stitch machine to six stitch machine in the short period of clip. Recently. Andy has developed a concern program which clearly states the good hereafter growing and tonss of funding required. Andy does non hold much money of his ain to put in the concern. so he is looking for the external funding beginnings.

In this study. I will be discoursing the different beginnings of external funding along with their advantages and drawbacks. and so I will be decided which beginning is the best for the Andy’s concern. Beginnings of funding: There are assorted beginnings of financing the concern but the most critical facet is to understand which beginnings are appropriate for that peculiar concern and how much fundss do we needed. The appraisal of beginnings is wholly judgmental. Along with the judgement. it is besides dependent on how willing he is to portion the information about his concern and ownership with others.

Beginnings of fundss are divided into 2 wide classs: -Internal funding -External funding. Andy’s nest eggs and income are already been exhausted in the procedure of growing. and he requires more funding. To assist Andy to take the determination sagely I will be discoursing few external funding beginnings. External beginnings: External funding includes ownership capital and non-ownership capital. These two classs are divided into other several classs. For the concern like Andy’s following three non-ownership capital funding is suited. • Banks • Venture investors • Small concern association ( SBA )

Banks: They are the fiscal establishment who lends the money to the concerns and persons and charges an sum of involvement against it. They are the hardest topographic point to happen the fundss as the bank does non allow the loan really easy but the clip is been altering now bank has come up many different loan strategies against which people are been given loans. A bank loan is considered as most coveted manner of funding. Peoples considered it as the most desirable because it is at times really rapid if you have good recognition standing in the market you can acquire a loan in no clip.

Furthermore. you can utilize that money in assorted ways and accountable for none. Although there are some advantages in acquiring a loan from the bank but there are some disadvantages every bit good. Disadvantages like. some loans carry a prepayment plentifulness so the borrower could non pay the sum early ( Scarborough. 2006 ) . Venture investors: Venture investors are those people who wealthy persons. corporate and formal establishments who are willing to put in the new concern and turning concerns.

In return for supplying the capital to the concerns. they normally require a per centum of ownership in the company along with control over the strategic way and payment assorted fees. “Private equity provides capital and entree to a web that can transform a company into an industry participant. ” Karen E. Klein noted in Business Week. “But the monetary value is high: a ball of your concern. ” Like every other funding beginning. there are some advantages and disadvantages every bit good. The chief advantage for the start-up concern is that they are non obligated to refund the money.

And the engagement of the high profile business communities can besides increase the credibleness of new concern. The chief disadvantage an enterpriser can hold from the venture investor is that they become the portion proprietors of the concern. and therefore they have the rights have a say in the determinations. The concern proprietor faces a dilution of their place as proprietors and possible loss of power of commanding the concern ( Scarborough. 2006 ) . Small concern association: Small concern association is the organisations in United States formed by the authorities that helps the enterprisers to get down up their concern.

Small concern association acts as the surety of loans for the people who do non measure up for the commercial loans. The advantages related to the little concern association are that since it’s a authorities formed organisation to promote the man of affairs. they are bear downing really low involvement rate as in comparing to the commercial Bankss. SBA takes a really speedy determination sing the blessings of loans to the people. There are many advantages attached to the SBA that makes it is desirable for the man of affairs but there is a glooming side of this loan every bit good.

Since its authorities loan no affair what happens to your concern you have to pay off this loan before any other debt. Furthermore. there is more paper work required than in commercial bank. The authorities wants to do certain that you are genuinely eligible for this peculiar loan or non. Andy’s beginning of funding: Andy should choose for the bank loan as it suits to the demands of his concern. Future of his concern is really bright and there is a warrant that his concern will acquire duplicate the size within following two old ages.

So giving the ownership in his concern would non be advisable if he wants to hold all the net income. and he can hold them as the affair of fact. As for the SBA. they have really long repayment agenda though the rate is a low but 20-30 old ages clip period does non worth for that sort of loan. Since Andy merely needs $ 700. 000. which can be repaid within 2 old ages because the one-year net income of Andy is 750. 000. He can easy pay off this loan with 2 old ages. Hence it is suited for Andy to take the bank loan. Decision: There are assorted beginnings of fundss.

Some funding can be done internally while some can be borrowed from others. In the instance of Andy his earning is already been consumed in the enlargement of the concern. So it is suggested to him that he should take the bank loan because he does non necessitate to give the ownership to the venture investors and does non necessitate to give whole life to pay that loan. Bank loan will be the most desirable suggestion as Andy can pay this loan final payment this loan within two old ages. Furthermore. he does non necessitate to give any ownership to anyone.