Question

8. Joe Latte completed a business plan and determines that it will take $120,000 to open the coffee and gelato shop. He has $30,000 of his own money and will have to obtain $90,000 in loans or want. How should foc go about getting financing? What is the probability that he can obtain a grant to start a combination codice and Italian ice cream shop?

subject should be accounting for entrepreneurship

Answer 1

In this case Joe needs an amount of $90,000 for bringing his business plan on ground. This amount can be raised through a combination of loans and small business grants. Joe needs to present his business plan along with his forecasted income statements, cash flow statements and balance sheets to the concerned financial institution to which it is applying for a loan. If the business plan is proper and the financial institution thinks that the plan will be financially feasible and will be able to meet its credit obligations in a timely manner then it will provide it with a suitable amount of loan that it considers appropriate.

The balance can be raised (i.e. the balance further required after investing $30,000 of his own money and obtaining loan) in the form of small business grant. Joe can enter into a contest in which large corporations provide grants to new business ideas. For instance the grants that Joe can look at are Fedex Small Business Grant, Chase Mission Main Street Grant, Wal-Mart Foundation etc. The probability of obtaining a grant will be reasonably modest and not too high because many new business ideas vie for grants from large corporations. In order to ensure that he gets the grant Joe will have to impress on the large corporations that provide the grant that his business idea is unique, scalable and sustainable and will lead to incremental value creation in the long run.

Joe can also contact the local Small Business Association (SBA) and SCORE office to determine what financing is available. He should also check with local and state agencies for small business assistance. Since his business plan is to start a coffee and Italian ice cream shop the chances of obtaining a loan will be very slim as the plan is not based on any new idea.