Answer to Question #5939 in Economics of Enterprise for amadu jalloh
imagine a startup company of your own and briefly trace its development from sole proprietorship to a major corporation with a focus on how that development would be finance.
When you are a sole trader and you don’t have enough money to develop your business rapidly, you can get finance from your relatives, friends, or just your own savings. If it isn’t enough, it is possible to go to the bank and try to get a loan, though it could be very small. Banks can offer leasing, factoring and instalments as variants of loans secured by collateral. Recently the role of the venture capital has become very popular. Venture capital has evolved as a solution to financial problems. In effect, venture capitalists provide private equity. But, in return, they demand a much closer relationship, more control, and a significantly higher expected rate of return. Having reached the medium point, you need to raise your funds in larger quantities then before. Any development of the firm depends upon financial ability of the firm that will be decided by market value of the firm. After continuing with good track record and goodwill in the market we raise the funds by one of the following ways. 1.Issuing new shares in market, as ipo's in primary market. 2.Getting debt from financial institutions as we have goodwill. 3.Issue debentures to banks who has given loans . 4.Issue shares to the existing share holders. 5.Issuing shares to employees of the firm. 6.Issue commercial paper to finance its needs.
When the growth is on the top, it is possible to get investments from other businesses or big corporations, who want to be the part of your own prosperous company, international financial institutions or even governments.