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Business Financing and the Capital Structure

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Business Financing and the Capital Structure
FIN 100
March 3, 2014
Dr. Marcus Crawford

Business Financing and the Capital Structure
A business can be defined as an occupation, profession or trade (Dictionary.com, 2014). It can consist of a person or a partnership of some sort. With a business comes struggles and success, the way a person or partnership handles those struggles may determine their success or downfall. With any business their main purpose is to make money and to stay above the rest of the market. As a financial advisor the writer of this paper will describe the advice they will give to the client for raising business capital, outlining the advantages and disadvantages to all options and explain the historical relationships between risk and return for common stocks versus corporate bonds.
Describe Advice for Raising Capital
As a business owner or operator it is always wise to look at all options to bring in new revenue or increase the capital in a company. It is in the financial advisor’s opinion to consider the following options: Microloans, Bank-Term Loans, Asset Based Loans or Small Business Administration Loans. Each one of these options will generate increased capital for the business.
Microloans are small loans given to small business borrowers to help businesses have working capital, usually reaching up to $50,000 (Entrepreneur Media, Inc., 2014). An average Microloan is granted for around $13,000 dollars dependent upon each situation given. The advantage of this option is it is usually granted to those that have never borrowed from a bank. The disadvantage of this option is higher interest rates.
Bank-Term Loans are the standard commercial loan, often used to pay for a major investment in the business or an acquisition (Entrepreneur Media, Inc., 2014). These loans have fixed rates and are classified as long-term or…...

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