Entrepreneurship joint venture - Assignment Example

Contents Abstract 1 Contents 2 Introduction 3 Importance of venture and Working capital 4 Forms of business finance 4 Advantages and disadvantages of Venture Capital as source of finance 5 Salient issues around venture capitalists 6 Conclusion and recommendations 7 References 7 Introduction Venture capital is a form of financing that is widely used by small, medium, and large enterprises in economy. Venture capital is also referred to as equity financing owing to the fact that it addresses the financing needs of a firm in exchange of stake in the firm in question.

This form of equity financing is often pursued by firms, which do not have the capacity to seek financing from other traditional financing modes like those sourced through the banks and public markets. It is worth noting that there are other forms of financing options, which the business can decide to explore to cater for its growth strategy and other operations (Mclaney & Atrill, 2006). Such options include loans from banks, debentures, owner’s capital, and grant finance. Importance of venture and Working capital Venture and working capital are critical for any form of business that is starting up.

The business under focus in this case is a beverage company known as Thasta (Mclaney & Atrill, 2006). The company by its nature needs both venture and working capital to realize increased business performance. . sound working capital, it is important that the business possess an aggressive credit policy besides ensuring that there is operational efficiency at the facility (Mclaney & Atrill, 2006). On the other hand, it is important to take note that venture capital is equally important for the startup of the business because it does not affect the liquidity of a business.

A business that is just starting operations rarely has revenue hence may not be able to afford loans or debenture leaving venture capital option as the best option for the company since it does not involve any financial obligations. It is worth noting that with regard to venture capital the various operations and projects of the company are financed in exchange for the shares of the company. Forms of business finance Apart from the venture capital, there exist other forms of capital, which include loans, debentures, owner’s capital, and grants.

Loans are funds, which are advanced to the business by financial institutions such as Banks. According to Mclaney and Atrill (2006), it is worth noting that loans attract interest over and above the principal amount. The business must therefore ensure that it regularly repays the principal amount and accruing interest. A debenture is yet another form of business financing option, which is available to the business. According to Mclaney and Atrill (2006), debentures are loan stocks, which are given subject to a trust deed.

The debentures can be either redeemable or irredeemable. The firms can also raise capital for the expansion projects of the firm through equity shares. The only downside to equity shares is that it reduces the shareholding capacity of the company. Mclaney and Atrill (2006) say that grant is another form of financing option, which the firm can