The partners have various options of financing at their disposal which can be selected according to risk and return associated with these options. The first feasible option for the partners is to invest from their own private sources where all partners can invest equally or according to a specific percentage they agree among themselves. The partners can also agree on a scenario where some partners only invest in the business while others only work for the business.
If there is a deficiency of capital, the business owners can arrange financing from several other sources such as obtaining a bank loan, persuading private investors to invest in their business or arrange to lease equipment and accessories required for the business. In order to achieve financial efficiency partners can also purchase inventory items required for production and sales on credit.
The partners should consider several issues before starting the business with respect to future profitability, stability and growth before making any hasty decisions. They need to answer several questions before launching their business. These questions are outlined below.
- What are the investment options available?
- What is the total amount of investment required?
- What are average returns of similar small companies in the region?
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