Ways To Fund A Business
Jeremy Tyson Jarvi
American Intercontinental University Online
This paper is going to reflect how I choose to fund my business (or company). There are a few ways to raise money: Selling stock, licensing the product, and taking out loans. I will also be describing the who, what and how of each of the following: Investment Banker, Stock Market, Financial Management, and Risk Financing. I will share with you my preferred source of funds, and I’ll explain to you the risks and rewards of what I have decided to do, as it will help you better understand my thought process.
Ways To Fund A Business
An “Investment Banker” is either an individual or ...view middle of the document...
” We have seen many companies in recent years have a failure in financial management such as ENRON, where preferred stock was being sold because the big wigs knew the company was imploding, and then when it finally did the people who held lots and lots of common stock were basically left with pennies from their stock sales.
“Risk Financing” is basically money to cover the unexpected loss of money within the company. So it’s basically a fail-safe thing. That there will be something to bail out the company in case there is need for it. It’s like a reserve fund to cover those unexpected losses.
As I ended my paper last week, I chose the business form of a corporation, because you have many people with many different talents working together, I don’t have to worry about my own personal wealth or home being lost due to a business failure. But I have been thinking about it for awhile now, and I really think for me to fund my company I should sell stocks, after all what better way to make others money as well as myself and my company than to have people put their trust and confidence in my product.
So, my company has a total of 100,000,000 shares of stock. 75,000,000 of those shares are preferred stock, which means I own the majority, and they are the prime stock, which means I will get my dividend before anyone else who owns common stock. Preferred stock is generally to keep control of the company in case someone wants to come in and try to take over, they have to own at least 51% of all the stock, and if the majority is preferred then usually the owner will not sell large chunks unless he is in a bad way.
So I have decided to announce publicly that I will be releasing 25,000,000 shares of common stock into the market, at an unbelievably low price, after all I want the people to know that this is going to be a deal for them and that they will make money in a short period of time. So, say the market values the stock at $5 a share, I want to undercut that a little bit so that people will be willing to buy. I will set my stock at $3 a share. Which means that there will be $75 million sold in my company. The market will still have it for $5 a share, which means the people will make 40% off of their initial purchase if they...