1. CHAPTER 13 DISCUSSION QUESTIONS 1) Explain the difference & the advantages/disadvantages of equity capital & debt capital. 2) Discuss the following sources of equity capital: A) Angels B) Corporate Venture Capital C) Venture Capital Companies 3) Explain the following federal loan programs aimed at small businesses: A) EDA B) HUD C) USDA D) SBIR E) STTR
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4. 1) FIXED CAPITAL -”CAPITAL NEEDED TO PURCHASE A COMPANY’S PERMANENT OR FIXED ASSETS.” -MAIN TYPES OF PERMANENT/FIXED ASSETS: 1) LAND 2) BUILDINGS 3) EQUIPMENT -MONEY INVESTED IN FIXED ASSETS TENDS TO BE FROZEN BECAUSE IT CANNOT BE USED FOR ANY OTHER PURPOSE.
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7. EQUITY CAPITAL VS DEBT CAPITAL FINANCING THE CAPITAL REQUIREMENTS OF A START-UP BUSINESS
11. ANGELS -”WEALTHY INDIVIDUALS WHO INVEST IN BUSINESS START-UPS IN EXCHANGE EQUITY STAKES IN THE COMPANIES.” -TODAY, THE LARGEST SOURCE OF EXTERNAL FINANCING FOR COMPANIES IN THE START-UP PHASES.
12. VENTURE CAPITAL -”FUNDS MADE AVAILABLE FOR STARTUP FIRMS WITH EXCEPTIONAL GROWTH POTENTIAL.” CORPORATE VENTURE CAPITAL -LARGE CORPORATIONS THAT INVEST IN FLEDGLING COMPANIES, MOST OFTEN THOSE IN THE PRODUCT DEVELOPMENT & SALES GROWTH STAGES. VENTURE CAPITAL COMPANIES -PRIVATE, FOR-PROFIT COMPANIES THAT PURCHASE EQUITY POSITIONS IN YOUNG BUSINESSES THEY BELIEVE HAVE HIGH-GROWTH & HIGH-PROFIT POTENTIAL.
15. ECONOMIC DEVELOPMENT ADMINISTRATION (EDA) -A BRANCH OF THE COMMERCE DEPARTMENT, THAT OFFERS LOAN GUARANTEES TO CREATE NEW BUSINESS & TO EXPAND EXISTING BUSINESSES IN IN AREAS WITH BELOW-AVERAGE INCOME & HIGH UNEMPLOYMENT.
16. DEPARTMENT OF HOUSING & URBAN DEVELOPMENT (HUD) -SPONSORS LOAN PROGRAMS TO ASSIST QUALIFIED ENTREPRENEURS TO START SMALL BUSINESSES THAT WILL STRENGTHEN THE LOCAL ECONOMY . -GRANTS ARE AIMED AT CITIES & TOWNS IN NEED OF REVITALIZATION & ECONOMIC STIMULATION.
17. RURAL BUSINESS-COOPERATIVE SERVICE (RBS) -PROVIDED BY THE U.S. DEPARTMENT OF AGRICULTURE. -A FINANCIAL ASSISTANCE PROGRAM OPEN TO ALL TYPES OF BUSINESSES DESIGNED TO CREATE NONFARM EMPLOYMENT OPPORTUNITIES IN RURAL AREAS.
18. -A PROGRAM OF 11 FEDERAL AGENCIES THAT AWARD CASH GRANTS OR LONG-TERM CONTRACTS TO COMPANIES WANTING TO INITIATE OR TO EXPAND THEIR RESEARCH & DEVELOPMENT EFFORTS. -SBIR GRANTS GIVE INNOVATIVE SMALL COMPANIES THE OPPORTUNITY TO ATTRACT EARLY-STAGE CAPITAL INVESTMENTS WITHOUT HAVING TO GIVE UP SIGNIFICANT EQUITY STAKES OR TAKING ON BURDENSOME LEVELS OF DEBT. SMALL BUSINESS INNOVATION RESEARCH PROGRAM (SBIR)
19. SMALL BUSINESS TECHNOLOGY TRANSFER PROGRAM (STTR) -USES COMPANIES TO EXPLOIT THE VAST RESERVOIR OF COMERCIALLY PROMISING IDEAS THAT ORIGINATE IN UNIVERSITIES, FEDERALLY FUNDED R&D CENTERS, & NONPROFIT RESEARCH INSTITUTIONS.
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