Choosing Funding for a New Company
Essay Preview: Choosing Funding for a New Company
Report this essay
Funding
Investment Banking is the best choice for the company to start gaining capitol. It is less risky than the stock market. Even though; financial management and risk financing are good business practices. Investment banking although expensive provides financial options that may not be available on their own.
Choosing Funding for a New Company
This scenario explores the ideas of funding a business. An investment banker is a representative for an investment bank. This representative helps companies and the governments raise the capitol they need. Investment bankers buy the debts and equities of a company guaranteeing funds. These funds are good even if the investment banker cannot sell all of the stock, known as under-subscription. An investment banker will hold onto the unsold stock guaranteeing the investors funds.
The stock market is another way for companies to find funds. The stock market is a public place where stocks and shares of a company are sold. Stocks are representations of the original capital or investments put into the company. Stocks do not represent the profits and equity of a company which changes all of the time. Companies raise money in the stock and shares to public investors.
Financial management is the practice of budgeting and planning for a sound business future. Some companies use what is known as a financial manager. Financial managers provide financial advice and support to business owners allowing them to make good financial decisions. Risk finance is not necessarily a way to gain capitol but a way of planning for possible future losses. You can either spend money on materials that are set aside for future use or buy insurance. Businesses use sources or funds to pay for losses. Some use a risk transfer plan. These plans use both internal and external transfer to help with loss prevention.
Using an investment banker is the way I would go to finance my company. There is less risk involved than using the stock market alone, because using an investment banker is a way to guarantee funds as the bank holds on to all stock they cannot sell. Also, investment bankers assume all the risk associated with the buying and selling of stock. Investment bankers also deal with IPO (Initial Public Offering). This is the first time a company sells stock to the public. New companies often use IPOs (Initial Public Offering) to gain capitol. Investment bankers also deal in private placements. This means that companies do not need to request or file reports with the Securities or Exchange Commission (SEC). While there is not as much margin for profit as there is in the stock market, the risk is considerably less. Investment bankers