Running Head: The Wisdom Of Capital1. The Wisdom Of Capital10.
1671 WordsMar 29, 20177 Pages
Running head: THE WISDOM OF CAPITAL 1
THE WISDOM OF CAPITAL 10
The Wisdom of Capital
Janae ' C. Rodriguez
Grand Canyon University PCN 822-0500
The Wisdom of Capital
The entrepreneur’s vision, determination, and purpose become null-and-void without assets and capital (Mikic, Novoselec, & Primorac, 2016). The nature of business is founded on the exchange of money. Entrepreneurship based on a theory of ideas ends in naïve failure. The wisdom to secure capital, assets, and fiscal resources increases the likelihood of success.
Capital and Assets for the Entrepreneur
Traditional avenues to secure financing have historically been through commercial banks (Types of Financing, 1996). The economic turmoil during the…show more content…
While this may not be a viable option for all entrepreneurs, it does provide the luxury of not imposing an interest payment, or the giving up of equity to a third party. However, it does run the risk of putting the individual in a precarious position, should the business prove to be unsustainable (Mikic et al., 2016).
Equity financing, aka investment, differs from debt financing in that rather than require repayment of the money, on a monthly basis, the money provided for financing is exchanged for a percentage of the business (Mikic et al., 2016). The premise is that with time and business expansion, the value of the business will sufficiently increase to repay the initial investment and provide profits to the investor (Shah & Thakor, 1988). The fiscal exchange typically occurs through a liquidity sale or initial public offering (IPO) (Mikic et al., 2016). This form of lending steps outside the traditional format and increases options for the entrepreneur.
Financing options could include an angel investor. In this domain, the entrepreneur receives funding through an independent resource who defines the terms and affords alternative repayment plans (Mikic et al., 2016). The angel investor can involve a leading individual within a mainstream corporation or independent person of wealth (Kuratko, 2014). The distinction is that this individual has the fiscal resources available to diversify and invest into