Read the pages in the Entrepreneur June 2017 edition and answer the below questi
ID: 2784821 • Letter: R
Question
Read the pages in the Entrepreneur June 2017 edition and answer the below questions. (Tasks 1-6). This is a story of a start- up. You can research on other similar companies to enhance your answer.
TASK 1 The report should cover the following points related to
1. (LO 1.1) Identify and discuss the main sources of finance available to the company, Include discussion on internal, external, long-term, short/medium-term sources of finance available this company - (minimum half a page)
(LO1.2) Assess the implications of the different sources of financeavailable. Include discussion on advantages and disadvantages of each source of finance considering legal and financial implications. (minimum half a page)
(LO1.3) Evaluate appropriate sources of finance for compareit4me. which needs to decide on the choice of financial funds for which will require capital for the following:
a) Investment in the big data analytics
b) Renting of office premises for a period of 3 years
c) Day-to-day operations
Suggest appropriate sources of finance for each of the above expansion purposes providing your reasoning. Finance sources should be carefully matched with their purpose.
(minimum one and a half a pages)
(LO 2.1) Discuss the various costs associated with the sources of financesuggested for the expansion needs above. Provide examples and explanations. (minimum one page)
DOUBLING grow, they've witnessed the growth since their original Series A funding, and they strongly believe in our plans for the future." “It's a great tors want to see this as well," Chehab adds. "It would be a pretty bad sign if your exist- ing investors stopped taking part in rounds, so it's impor- tant for us to get these guys to come back in. It gives the right signals to new, incoming investors." JON RICHARDS AND AMREHAB COMPAREIT4ME.COM FOUNDERS MAKEEVERY (INVESTMENT) ROUNDCOUNT And compareit4me certainly would like to see new names in its list of ivestors- the company is, after all, looking to close a Series B round of indication, then compare- expected to be more than Entrepreneur Middle East t4me's rivals should indeed double that of 2016. Another $10 million in the coming filmed compareit4me.com co-founders Jon Richards themselves against it- after cnt state is how its back to some really interesting and Samer Chehab for an all, since its launch in 20ers keep returning to support nvestors-guys who can episode of #EntMETalks, this enterprising startup a video series that we think twice before pitting good sign of compareit4me's months. "We're speaking the venture- its latest funding round sees the participation of existing investors STC Ven- few rounds if we need it," write really big checks, who can support us for the next has been able to raise a total which is, by itself, a testatures, Wamda Capital, Dubai Chehab reveals. "Not only ment to how well this online Silicon Oasis Authority and this, but they will also be able we asked the duo if they comparison site is doing. Its Saned Partners, and the sig to support us with guidance had a message for theirnumbers are impressive: CFO nificance of this act isn't lost and contacts." But getting competitors in the market, Jonathan Rawling tells me o Chehab and Richards. "We funds in this round hasn't don't take this for granted; that compareit4me has seen organic traftic rise by over e feel incredibly lucky that 400% since January 2015, these guys are ready to sup- and since its Series A round in September 2015, its annu been smooth sailing, the co- founders note. It's not easy Chehab says, "I think we're and Richards replied: "Haram what I'd say!" He said this port us on an ongoing basis," lucky that we've shown great Richards says. "But this is not growth. We've shown that we in late May about raising arevenues have more than qua a charity. They're supporting have a good understanding of the insurance market, and»» announcemen total of US$3.5 million is any drupled, with 2017's revenue us because they've seen usExplanation / Answer
Answer :
1. company has begun its operation in 2011 at that time it has raised funds from private equity. Till date, it has $9 million in its coffer and planning to raise $3.5 million funds by the end of May. These funds come with series A plan. Now the company has plans to raise $10 million in the series B through the various investor.company is relying totally on the private equity funds which are an external source of funding.
Under series B, the funds are being planned to raise from Middle East countries even though the raising of funds look difficult from this market. This is due to the fact that there fewer investor who can write a cheque of more than $2 million.
2. Private equity funds are deployed in the company since its foundation stone being laid out.Even though it has its own merit and demerit this company is solely relying on this investment.
An advantage of using PE funds:
a)The raising of funds through the angel investors is comparatively easy if your business story is intact and had been growing since you have started your business operations.
b) The advantage of an investor in the business is that you have multiple sources of funds with the different motive of investing.
A disadvantage of this source of financing:
a) The investor takes time to part funds for the project in any company. so advice is if you are chasing any investor for the funds you have to start early in the process.
b) It also takes time to Private equity fund or external investor to conduct a due diligence process before disbursement of money. so since its lengthy process immediate need of working capital cant be satisfied through this form of funding.
c) In addition to it, Investor also needs confidence from promoters with the other investor name associated with the company. It can become difficult for any startup if they face any sort of crisis in terms of their profitability in the shorter term as well.
3) a) Investment in big data analytics: Investment in big data analytics require long-term sourcing of funds since this investment will start repaying after a specified tenure of fixed capital formation.
source of funding: 1. PE funding: it easy to get by since this company is a darling of angel investor and PE funding can be stretched for at least 4-5 year tenure.
2. Long-term loans from the bank( External funding): The syndicated loan can be taken it account since for investment purpose bank usually charge lower interest rate as compared to the normal expansion plan.In addition to it, since its start-up company Govt will also help by providing incubation funds which are also at a lower rate of interest.
b)Renting of office premises: for renting of office premises it only requires short-term loans and advances since by renting an office will start having regular cash inflow which will make the repayment of loan easier. so short-term external funding through a bank can be possible.
c) Day to day operation: From day to day operation, the working capital loan can be undertaken which can be repaid in the one operating cash cycle.
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