, PLEASE USE THIS DOCUMENT AS A GUIDE TO ANSWER YOUR ASSIGNMENT
Please note that the author of this document will not responsibility for any plagiarizing you
commit.
Having acquired sufficient knowledge and skills on financial management for small business, you
must demonstrate practical competencies in constructing financial statements and in conducting
feasible financial forecasting. As a new entrepreneur understanding financial management and
accounting, forms an integral part of running your small business. In addition, you should also be able
to forecast the financial outcomes that could result from your decision. The projections of business’s
profits, its assets and financial requirements, and its cash flows are essential in determining whether
your business is economically viable. Having acquired sufficient knowledge and skills on
entrepreneurship and small business management, you must demonstrate practical competencies in
financing the financial or capital needs of your business, building customer relationships, developing
the product and managing the supply chain of your the business.
Think of any business you would like to start and answer the following questions:
Question 1
1. With reference to practical examples, critically discuss how you would finance your business.
Motivate why you choose specific ways of financing over others.
Starting a new business is an exciting yet challenging venture that requires not only a great idea but
also the financial resources to bring that idea to life. The ability to secure financing is often a critical
determinant of whether a startup succeeds or fails. For this essay, I will outline a business plan for a
hypothetical startup in the eco-friendly fashion industry, which aims to produce sustainable clothing
made from recycled materials. Given the environmental awareness trends and increasing demand for
ethical products, this business has the potential to thrive. Financing this business will require careful
consideration of various funding options, each with its pros and cons. This essay will critically
discuss these options, with a focus on selecting the most suitable financing methods for this type of
business.
Financing Options for a New Business
Personal Savings
Description: Personal savings involve using one’s own money to fund the business. This is the
most straightforward and risk-averse financing method, as it does not involve external parties.
Advantages: The primary advantage of using personal savings is that it gives the entrepreneur
full control over the business without any obligations to external financiers. There is no need to
pay interest or relinquish equity, allowing the entrepreneur to retain full ownership and
decision-making power.
Disadvantages: The main drawback is the limitation of available funds. Many entrepreneurs
may not have sufficient personal savings to cover all startup costs, which could hinder the
growth potential of the business. Additionally, using personal savings can be risky, as it ties the
entrepreneur's personal financial stability to the success of the business.
Practical Example: A well-known example is Michael Dell, who started Dell Computers
using personal savings while still in college. His initial investment of $1,000 helped him build
a company that would later become one of the largest computer manufacturers in the world.
