Essay - Financial Risks of a Business During Start Up 1. Introduction...

Financial risks of a business during start up

1. Introduction

The contemporaneous society reveals a tendency of every man for himself. Within the business community, this has materialized in the opening of numerous small businesses, run by former corporate employees, who became motivated by ***** desire to be their own bosses. We see examples ***** successful entrepreneurs every day and each of us may be tempted to try ***** open a business. It must however be mentioned that the risks ***** opening a business are rather complex and more numerous that one ***** seem to think. And they spread on ***** levels, such as marketing or management risks, financial risks of human resource *****.

2. Financial Risks of a Business ***** Start Up

***** terms of financial matters, the *****er of a new ***** h***** to consider his funding opportunities. This is mostly valid when the owner does not possess the entire sum of money required for the venture. "A company's operations and investment can ***** financed from outside ***** business by incurring debts, such as though bank loans and the sale of bonds, or by selling ownership interests. Because each method of financing obligates the business in different ways, ***** dec*****ions are very important" (Fabozzi ***** Peterson, 2003). In order for the owner ***** acquire the necessary capital, he h***** three alternatives, all with adherent risks. They refer to contracting ***** loans, the issuing of s*****cks or a joint business with a partner; their risks are succinctly presented below:

Financing through bank loans

This ***** basically sees that the business ***** would request the services of a commercial bank. The bank would establish several terms and conditions and the business owner would have to reimburse ***** loan at given expiry dates. The ***** posed by this approach could refer to some of the following:

***** deciding power is the loan officer and he could refuse ***** granting of t***** loan the owner has to possess several assets to offer as collateral - he stands to loose ********** ***** if ***** encounters difficulties in pay*****g the rates ***** owner must also possess a well *****ed and solid business plan ***** a clear projection of expenses and revenues other ***** and debts ***** the soliciting party would also be analyzed ***** deducted from his payment capabilities, lowering as such the money he is eligible ***** receive more and ***** *****s are implementing a flexible interest rate, which could easily result in higher debts

F*****ancing ***** stocks

***** issuing of stocks ***** that the ***** owner would issue securities onto the market. Several small investors would purchase them and the money used to pay for the stock ***** constitute new capital for ***** organization. The organization would remunerate the investors through dividends, generally at the end of a fiscal year. Some risks posed ***** this financial opportunity could ***** to:

since the ***** pour *****ir money into the *****, ***** ***** desire to ********** involved in ***** decision mak*****g process - their