Finacial Recommendations

Abstract

Andy Rexford, owner of Custom Stitches, a custom embroidery shop in his garage sometime ago. Since then, the business has grown enough to become a fulltime family business with annual sales of more than $750, 000.

Custom Stitches, now has a total of 5 six heads machines, these are machines that can produce the same design in six items at the same time. Early on the company established a niche by accepting small jobs; jobs that the big shops would not do and though the company now supplies area colleges and businesses with a multitude of custom embroidered items, they still take those small jobs that nobody else wants.

Recently, after attending a seminar, Andy developed a business plan for Custom Stitches and now, he sees an opportunity to double the size of his company within the next two years. The challenge will be to find $700,000 which will be needed for that growth; as projected in his financial forecast. This has left Andy wondering where he is going to find this money, since without it he will not be able to finance his company's growth.

The author of this paper, will provide Andy with some suggestions, where he can start to look for the financing he needs, the advantages and disadvantages of using each source of funding and which sources could be most promising to fulfill his financial needs.

Financial recommendations for Custom Stitches

Introduction

Since Custom Stitches has established a customer base, has grown considerably since its startup in Andy's garage and it is now a profitable business. Andy has more choices in which to look for the growth capital he needs.

But before we get into the different outside sources of funds that could be available to Andy; this author feels that the first place to look for money is within. Andy first needs to take a look at his internal finances and he may be surprised as to how much he could find from his personal savings and retained earnings. Whatever amount of money he can pull from these areas may be best utilized by reinvesting it back into the company. Since this is money that will not have to be repaid and will carry no penalties, finance charges or interest charges just to name a few benefits.

The other sources of funds that this author will recommend for Andy to check into, since his company appears to be in a good financial position; will be Corporate Venture Capital and sources of Debt financing such as, Small Business Lending Companies and Commercial Banks.

We will first take a look at Corporate Venture Capital. Who they are; as well as the advantages and disadvantages that may exist when using each of these sources of funding. Corporate Venture Capital Companies are large corporations that have become financiers of small businesses. Studies indicate that about 300 large corporations are doing this. Some of these companies include, but are not limited to Intel, Motorola, UPS and General Electric, just to name a few.

Corporate Venture Capital Companies make money when the business they have invested in is successful. Therefore, the advantage is, they provide more than just financing. The right partnership can provide your business with technical expertise, distribution channels, marketing expertise and introductions to customers and suppliers. But most importantly, doors that normally would be closed miraculously open