Question

[07-14, 2:09 p.m.] Channa: Tom Andersen owns an electronics firm in Wichita. He has told you that he has been suffering some cash flow problems, but has avoided having to borrow money by letting some of his bills run late and by cutting corners on meeting some of his contractual obligations. When you raised your eyebrows as he told you this, he said, “Don’t worry; I’m really not nervous about it. I have some big orders coming in, and am confident I can catch up on my bills and renegotiate my contracts then.”
[07-14, 2:09 p.m.] Channa: Jackson Sprout, a long-time friend of yours, is disenchanted with what he perceives to be a lack of quality in the local restaurants serving Italian-based foods. In talking to you about this, Jackson says, “My grandparents are Italian. Over the years, I have learned a great deal about cooking great Italian dishes just by watching them in the kitchen. There is no doubt in my mind that I could easily open a restaurant and be quite successful.”
[07-14, 2:09 p.m.] Channa: Brian just formed a C corporation. The shareholders of the corporation will be Brian and his wife Carrie and his father Bob, who put $35,000 of cash into the business. Brian explained to his wife and dad that he organized the business as a C corporation because of the ease of transfer of ownership of the stock. He said that if any of the three of them wanted his or her money out of the corporation, that person could simply find a buyer for the stock, just like the shareholders of Google and other large public corporations do, and transfer the ownership.
a. Does Brian have realistic expectations regarding the ease of getting out of his investment if he wants to? Why or why not?
b. What would be a better choice for form of business ownership for Brian?

answer please

Answer 1

NO, the realistic expectation about easy exit is false. It is a private equity firm

Firstly, As such, NEW lenders will want to know more about your past performance, cashflow forecasts, turnover, what market research has been carried out and what qualifies you and your team to drive the venture forward.

If your business is a unique concept that aims to exploit a gap in the market, they’ll also expect you to have carried out rigorous research beforehand. After all, just because you’ve found a gap in the market doesn’t necessarily mean that there’s a need or profit to be made from it.

Plus, although you’re not required to repay investors, any capital that they do provide will come at the cost of equity (shares) in your business. As a result, this will have a direct impact on how much influence you have, giving investors the ability to cast votes on key decisions. You will also need to establish a regular reporting system to keep investors up to date on how well your business is performing. This is why you must think very carefully about the amount of equity you’re willing to part with, whilst ensuring that you still retain a majority share. If investors decide to pull together, it could even lead to them appointing new management to drive the business forward in your place.

Finally, should any investors decide to make good on their return they could sell their shares to someone outside of your business. This might lead to someone with opposing views or a lack of sufficient experience buying into your business and having a say in key decisions. To avoid this, you could, instead, buy back their shares in your business. However, as your business grows, so does the value of their shares, making this a potentially expensive task to fulfill.

B) In order for you to achieve your vision, having access to sufficient amounts of capital is a vital responsibility. You just need to figure out an effective strategy for how it can be acquired. Fortunately, there are a number of pathways available, including Private Equity. But if you don’t want to give away shares in your business, there’s no need to worry. The Alternative Finance Industry is reshaping the UK lending landscape, paving the way for a new generation of business solutions, suitable for a wide variety of purposes and financial situations. All you need to do is source an agreement that matches your needs from a lender you can trust.