Finance Plan
Equity Financing
Owner Investments: Since there are three people in the partnership, each of us could contribute $30,000.
In total, there would be $90,000 of owners investments.
Debt Financing
Bank Loan: $90,615_
I think that it's good to split the total Start-Up cost ($180, 615) and get a bank loan for half the money, and owners equity for the other half. A person only has a certain amount of money, and if you put it all in a bank loan then you would not have any emergency funds, or capital if you wanted to expand the business. If all the money was in a bank, then you would have problems because you would be relying too much on debt. Putting half the money in equity financing is less risky than putting all the money in a bank because then you would also have less to pay back. Also debt can make it difficult for a business to grow because of the high cost of repaying the loan.
Equity Financing
Owner Investments: Since there are three people in the partnership, each of us could contribute $30,000.
In total, there would be $90,000 of owners investments.
Debt Financing
Bank Loan: $90,615_
I think that it's good to split the total Start-Up cost ($180, 615) and get a bank loan for half the money, and owners equity for the other half. A person only has a certain amount of money, and if you put it all in a bank loan then you would not have any emergency funds, or capital if you wanted to expand the business. If all the money was in a bank, then you would have problems because you would be relying too much on debt. Putting half the money in equity financing is less risky than putting all the money in a bank because then you would also have less to pay back. Also debt can make it difficult for a business to grow because of the high cost of repaying the loan.