Share
Explore BrainMass

Best source of equity capital

Christine Hernandez is in the process of launching a restaurant. She has never owned a restaurant before, but she has worked in two of the best restaurants in town. Starting out as a hostess, Hernandez developed a special knack for the business and quickly worked her way up to manager. Her 18 years of experience have given her a solid foundation for running a restaurant.

Hernandez has worked with a counselor from a nearby small business development center and a counselor from the Service Corps of Retired Executives to prepare a business plan. She asked two other consultants and an accountant to review the plan, and she incorporated their suggestions into the finished product. Hernandez has personal savings of about $15,000, a paid life insurance policy worth $100,000 that her grandfather bought her when she was born, and a small rental property with no mortgage worth about $75,000.

She is considering how to finance her business start up. She needs $165,000 to start her restaurant. She has chosen a location in the center of a major city. The neighborhood is economically depressed, but she thinks a trendy restaurant will draw attention, regardless of the location. Also, her initial rent and utility expenses will be low.

What will be her best source of equity capital? Why?

Solution Preview

Her best source of capital will be to raise funds from an angel investor or venture capitalist by diluting stake in the venture and providing some stake to the ...

Solution Summary

Christine Hernandez is in the process of launching a restaurant. She has never owned a restaurant before, but she has worked in two of the best restaurants in town. Starting out as a hostess, Hernandez developed a special knack for the business and quickly worked her way up to manager. Her 18 years of experience have given her a solid foundation for running a restaurant.

$2.19