Developing Hospitality Properties - Essay Example

The next step is deciding the best ways to raise money which will be discussed in this paper. Debts are very available and utilizable sources of funds for any purpose. According to (Walker, 2009), commercial banks are among the best and most common sources of loaning finances. Such funds come in the form of loans which are usually sufficient for all needs. Such loans are classified according to the repayment period. Term loans are repayable over a long period probably longer than a year, an intermediate loan is repayable within five years and there are those loans that take longer periods of over 20 years.

However, such loans are not easily acquired and this is one of its restrictions. Barrows and Powers (2008) explicitly state other limitations of such loans as; security is mandatory, some interest rates are very high and the risk of receiving due to defaulting the loan are usually high. A lot of capital is required in this restaurant keeping in mind the myriad of services it is intended to offer. According to Hunt (2008) this is one property of a high risk business because the surety of the population feeding on spicy Indian cuisine is not 100% guaranteed.

Therefore, he states that the other kind of debt can be through venture capital. In this case, the venture capital source is refunded through owning equity in the restaurant. One of the advantages of such a debt according to Burrows and Powers (2008) is that it is readily available especially for new businesses such as this. Secondly, it creates an environment where public relations and advertising are made easier and easy success of the business. Lastly, it has less risks compared to most loans.

However, the mother company may end up losing complete control of the business operations, and also the risk of receivership in case of defaulting payment. Investors or rather angel investors as Leman and DuFrene (2010), are not really classified under debts. These are just people who have to be convinced of the success of one’s business before they invest in it. They are looked at as more of private banks by most people and authors too. The two authors state that recently, this concept has been made easier by the knowledge of availability of such investors through networking and other business professionals.

An agreement is made on how and when to pay the investor back depending on the businesses flexibility. Among its advantages is that it is readily available, flexibility in payment and in some cases, the investors double up as advisors. Walker (2009) states that such kinds of debts are usually more expensive and it is very difficult to find an investor who is willing and able to raise the required amount. In a way, debts are also provided by small business investment companies. Apparently, such companies are sometimes ostensibly stated as banks but they are completely the opposite.

Longnecker, Etty, Palich, and Hoy (2009) have explicitly shown how some of these businesses sometimes partner with the government in providing small or medium sized loans. All they demand is a percentage of ownership in the restaurant which they will hold on to until all their money is paid back. The reimbursement period is usually flexible and the investment funds are easily acquired. However, Walker (2009) states that ownership in small business investment companies is tantamount to almost total control.

Making decisions for such companies takes a long time as all the stakeholders have to be consulted and unanimously