PBL 6 Accounting for a start up company
How to secure funding after having a business plan?
First, there are two ways to externally fund a business: debt and equity.
Debt: The investor receives a note for his or her cash. The note spells out the terms of repayment, including timing and interest.
- Benefit:You retain ownership of your company.
- Downside: You have an obligation to repay. If you fail to meet your commitment, the lender, under certain circumstances, can force the company into liquidation.
Equity: An owner who uses equity to fund a business turns over an ownership stake to an investor in return for the latter's cash.
- Benefit: There is no obligation to repay the investor.
- Downside: Owner has to give up a part of the ownership of his or her business. This can entail losing some control over the company.
There are many different sources of equity and debt funding. We’ll briefly consider several examples.
Debt
- Small business lender:Many organizations are interested in lending to small businesses. However, most lenders will want the loan to be secured by assets of some type, and rates may be high.
- SBA loans: The Small Business Administration has many programs, but in general, these loans require a guarantee that the loan will be repaid, to enable businesses to get loans from traditional lenders.
- Banks: Traditional banks make small business loans. However, they typically require a track record and will often want the loans secured with assets.
Equity
- Bootstrapping:The business funds itself. As the business grows, it throws off cash that enables further growth.
- Self-funding:Entrepreneurs fund their businesses themselves. They use savings or personal debt
- Friends and family
- Angel investors: These people are typically affluent individuals willing to invest in businesses.
- Cloud funding: There are a number of groups that will allow you to pitch your ideas to investors via the internet.
- Partners: Make partnership with business related to your area
- Venture capital: These firms provide early-stage funding, but are typically looking to make relatively large investments and take a significant share of the company -- often a controlling interest.
- Crowd funding: These are primarily web-based projects and allow individuals with a business, idea or project to reach out to thousands of potential investors through various platforms.
（Source:10 Ways to Fund Your Small Business)
How does limited liability company manage their obligation in Finland?
Finnish law makes a distinction between private and public companies limited by shares. The mark “Oy” stands for private companies limited by shares, and “Oyj” for the public ones. The private company limited by shares is the most common form of limited company in Finland, and its economic function is the equivalent of Ltd in England and GmbH in Germany.
The minimum capital in a private company limited by shares is €2,500, and in a public one €80,000.
(Sources: Entreprise Finland Helsinki Business Hub)
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