Sources of Funds

Coming from a two-head sewing machine and computer company operating out of his garage, Andy has managed to grow has grass roots operation into a near million dollar conglomerate which he is looking to expand, as is almost every red blooded individuals concern here in America, money to do so is an issue…..below are some alternate avenues Andy should explore for additional money.

A few places I would suggest Andy look for financing for his Custom Stitches embroidery business would be a(n):

• Angel Investor- who are usually successful entrepreneurs who want to help new business owners or entrepreneurs get their business up and running. They are usually investors who are looking for a higher rate of return then the customary methods of investing (Small Business Notes, 2009). The term derives from the early 1900's where rich businessmen invested their money in Broadway productions. Today it is referred to as an expert, or very well connected individual (Wikimedia Foundation, Inc., 2010); in addition to investing their own money to help a fellow entrepreneur, many angel investors do so in exchange for ownership equity, usually no less than 10 percent (Entrepreneur Media, Inc., 2010). Andy could find such investors "hiding" in places like business incubators, which are programs that provide hands-on management assistance and/or offer shared office services, access to equipment, and flexible leases, helping new businesses survive and grow during the startup stage (ZDNet Inc., 2000). They can be found in/at venture capital clubs, universities (lurking around entrepreneurship programs who are always aware of new business ventures); and angel confederacies, informal groups that sometimes come together and fund a company (Entrepreneur Media, Inc., 2010)

Let's not let the name "Angel Investor" name/term fool you, as kind and nurturing as this term may seem there are some disadvantages to them;

o Some investors can be more greedy and motivated by profit potential than guiding the firm to be successful

o They can be very expensive, most investors, if not all will expect a large Return on Investment of 10% or more for their exit

o Unwilling control of certain portions of the business they are invested in; especially when the investor has little to no experience in the company or industry (Go4Funding.com, 2009)

But there are very positive points to angel funding:

o Angel investors can supply the needed capital for new business ventures when commercial banks and/or other known financial institutions would not

o These investors can be more flexible with the investment criteria and agreement; investment terms can be negotiable and more "new business venture" friendly

o They can also bring a wealth of knowledge and resources, support and contacts (Go4Funding.com, 2009)

• Venture Capital- a group of wealthy investors, investment banks or financial institutions that fund startups that are not accessible to capital markets; their investments are usually made as cash in exchange for shares in the invested company (Investopedia ULC, 2010). Venture capitalists seek out industries that are positioned for fast and high growth and profit potential and unless Andy has a plan of being very aggressive with his company's profit potential, he should seek alternate avenues of funding, as venture capital firms invest in companies who are $100 million or greater in value (Smith, 1998).

Pros of venture capital funding would be that the funds invested by venture capitalists are not loans and do not need to be repaid, instead venture capitalist will retain a portion of the company's equity until the company goes public or is bought out by another company (Wilson, 2000).

A con, to new businesses, would be that the marketplace in which they were investing must be at least a billion dollars and that the company must have at least a million dollar in sales potential over the first five years (Thacker, 2008).

• Leasing with an option to buy can be an option Andy can also pursue to expand his business in terms of equipment. Instead of buying more six-head sewing machines,