Entrepreneurial ventures Essay Example | Topics and Well Written Essays - 1250 words

Entrepreneurial ventures - Essay Example Business finance is a wide area and an exhaustive examination of each is not possible. However, the essay will bring out the disadvantages of each method of financing (Galloway 382). The bias may lie on the start-ups given that the initial stages of the business are the most difficult to finance since the risk is usually highest. There are two broad categories of business finance: debt financing and equity financing. These are ways of sourcing the capital that a business requires either to start operating, continue its day to day operation operating, or to attain a given strategic objective. Debt financing has the characteristic that the business or the entrepreneur has to repay with interest. The debt capital is a liability. Equity financing is the investment of the entrepreneur and other owners into the business (Krulikowski 245). This is risk capital. The distinction between debt and equity is that debt is a "loan" to the business while equity represents the extent to which one "owns" the venture. This leads to the issue of ownership and control of a business venture which complicates many startups. Debt financing maintains ownership while equity financing cedes some percentage ownership of the business venture. This is a significant consideration when choosing the type of financing for the business. There is no shortage of investors in the world, but there is a shortage of successful entrepreneurs. However, regardless of the source of financing, the entrepreneur must carefully evaluate the type of financing that the business requires (Krulikowski 267). This will depend on several factors. Firstly, there is a distinction on whether it is a startup or an established business. The size of operations will also determine the financing. The entrepreneur must have a business plan for the particular venture he or she plans to undertake. This means that