- August 19, 2012
- Posted by: essay
- Category: Free essays
The stable finding of the bookstore is one of the main conditions of the stable development and progress of the business. In fact, the financial support is extremely important, especially at the first stage of the development of the business since the bookstore cannot gain substantial profits and, therefore, needs investments and funding from external sources. In such a situation, the financial support from the part of the relative may be very helpful and costs of such funding are minimal, but there is still the risk of the lack of financial resources and problems with the stability of the funding because financial resources of the relative are limited that makes the entire business vulnerable to the threat of financial crisis or even bankruptcy.
In such a situation, it is very important to find alternative sources of funding which could be effective and stable at the same time. In this respect, it is possible to name several source of funding of the bookstore. Among the variety of sources of funding bank loans and venture capital seem to be particularly effective, especially compared to the funding from the part of the relative.
First of all, it is necessary to underline the fact that bank loans is a widely spread form of funding of the business and many small as well as large companies developed their business successfully using bank loans. At first glance, this form of funding is very effective because the bookstore can loan the essential some of money for a definite period of time and return this sum within the defined time with interests. In this respect, it should be said that financial resource of the bank are not as limited as those of the relative, but a bank will naturally define the loan by the market value of the company, i.e. the bookstore. In such a way, the bookstore will have to return the loan and interests to the bank, while in the case of financial problems the bookstore will have to be sold out in order to return the loan and interests. At this point, the financial support from the part of the relative is more reliable because it is always possible to find a compromise. On the other hand, it is possible to prolong the loan or take the bank loan for a long period of time. Even though the bookstore will have to pay off a larger sum but it will able to get significant funds for the rapid launch of the business.
Alternatively, it is possible to use venture capital, which is easier to get because banks, as a rule, deal with reliable companies which have already got a stable position in the market and are reliable enough, while the venture capital is oriented on risky investments. Therefore, it will be easier to get the venture capital for the bookstore. However, it is necessary to remember that the company will need to give investors a part of its shares in exchange for the venture capital, i.e. investments. Consequently, the owner of the bookstore is likely to lose its full ownership and share it with investors.
Thus, it is possible to conclude that the use of various sources of funding have their own advantages and drawbacks.
In this respect, it is possible to recommend using the combination of funding by the relative and bank loans, which allow the bookstore to develop steadily.