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    Raising Capital and Bootstrapping for Small Businesses

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    Entrepreneurship - Unit4_DB

    Source of Funds

    Andy has joined your small business owners group and is recounting his difficulty in acquiring financing. This leads to a discussion on the following:

    ? Why is it so difficult for most small business owners to raise the capital needed to start, operate, or expand their ventures? Support your work with reliable outside sources.
    ? How can a firm employ bootstrap financing to stretch its current capital supply?

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    Solution Preview

    According to the Small Business Administration, 50% of small businesses fail within the first five years of operation. Therefore many investors are not interested in lending money to small businesses.

    As investors are more comfortable dealing with companies that have a history of profitability, new business owners are less likely to peek an investors interests. Investors are interested in results and requestors need to be able to support their claims of stability and the ability to repay the loans. New and small business owners are unable to support their claims and investors fail to see the vision.


    A lack of connections within the financial industry can also impact a small businesses opportunity to obtain a loan. Therefore, networking is important. Small business owners should contact the SBA for a list of events they can attend to network with lending ...