Chapter 15 Entrepreneurship

Capital

All assets, including buildings, equipment, and funds needed to start a business

Equity

Ownership interest in the form of common stock in a company

Venture Capital

Firms provide financing to start-up companies and small businesses that are believed to have long-term growth potential

Debt Capital

Capital that a business raises in the form of a loan to be repaid at a later date

Equity Capital

Capital that a business raises by selling a percentage of a business

Line of Credit

Arrangement between a bank and a company that allows a company to borrow a certain amount of money at any time

Line of Credit Benefits

• Flexible payment terms

• Access to cash on demand

• Builds business credit

• Flexibility of usage

• Helps with cash flow

Trade Credit

A supplier allows a company to buy now and pay later

Bootstrapping

A situation where an entrepreneur starts a company with little capital. The individual will be as frugal as possible with expenses

Kickstarter

A crowdfunding platform where entrepreneurs can gather money from the public

Presales

The sale of a good or service before its release date at a discounted rate

Angle Investors

An individual investor who provides capital to start-up businesses in exchange for debt or ownership equity

3 C’s of Credit

• Character

• Capacity

• Capital

Character

• Will you repay the debt?

• Are you honest and reliable?

• Have you used credit before?

• Do you pay your bills on time?

• Do you have a good credit report?

• Do you have character references?

• How long have you lived at your present address?

Capital

• What if you do not repay the debt?

• Do you have any valuable assets?

• Do you own property?

• Do you have a savings account?

• Do you have investments?

Capacity

• Can you repay the debt?

• Do you earn enough income to support your credit use?

• Do you have a steady job?

• What is your salary?

• How many other debts do you have?

• What are your current debts?

• How many dependents do you have?

Contingency Plan

A plan designed to take action in the event of a future event or circumstance