Health care Essay Example | Topics and Well Written Essays - 1250 words

Health care - Essay Example Nevertheless, the business takes a period to reach break-even-point in order to make profits; in fact, there is a need for a financial security for the viability of the new business. Therefore, the paper will focus on comparing various forms of equity and debt financing alternatives, thereby elaborating of their advantages and disadvantages. The paper will also identify the steps involved in determining the financing to undertake, and the stage of the business where Equity and debt financing is most appropriate. Comparing Types of Equity Financing and Debt Financing Alternatives One of the forms of equity and debt financing is the use of personal savings, whereby an entrepreneur uses money saved for a given purpose. There are not expectation of troubles related to drowning draining of an account with saving that are set for financing equity and debt. Therefore, there are plans made to reserve his savings accounts for financing the equity or debt; hence, troubled by an emergency. The other alternative of financing is the use of bank loans, whereby the private banks are approached by the entrepreneurs as sources of financing debts. In this case, the small ventures secure a personal loan or line of credit for various financing their equity or debts, and they leverage their assets real estates, equipment and inventory as collateral to secure their loan. Therefore, the banks are used as an option of small businesses for raising funds, though the final decision of securing the funds depends on the balance established by the entrepreneur about the pros and cons of the bank loan as a source. The other source of financing equity or debt is government grants, whereby the government offers loans and grants programs to entrepreneurs in order to assist them the effort to expand their venture. The grants are in the form of free money while the government guaranteed loan has interest rates that are below the private banks. Therefore, grants are sources of free financing offer ed by the government organizations and entities, and it can be a substantial source of financing equity and debt in a business. Advantages of Each Form of Financing Available to Entrepreneurs One of the advantages of personal savings as a form of financing is low acquisition cost, whereby the entrepreneur is not bound to pay interest on bank loan. Moreover, using personal savings for financing the business where is a feeling of flexibility in the financing (Jennings, 2012). The other alternative of financing the equity and debt is the use of a bank loan whereby it enables the entrepreneurs to maintain their cash on hand, as they finance their equity and debts in order to survive in the period of the business. There is situation when the business experiences problems and the bank loans can contribute significantly in protection of personal assets and bankruptcy. Government grants are extremely beneficial to the entrepreneurs since the funding has not financial responsibility; thus, i t can be an effective source of financing equity and debts. The government grants are associated with the benefits of being derived from the tax income that is having been paid by the seeker. Furthermore, the government grants offer a way of tapping the past tax payment for receiving debt-free funding from the government. Disadvantages of Each