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In funding her start-up small business, Rhoda Allegro could not hope to get equity financing from stockholders. Small businesses are usually financed by the pockets of their owners. However, in Rhoda Allegro's case she cannot hope to generate the required amount utilizing her savings in her account.
The music retail store can also be funded by informal investors like family, friends, relatives, employees, or colleagues if they are willing to chip-in some of their available money. This possibility of course, is positively related to their support to Rhoda's business venture.
More formal sources of equity will be angel investors and venture capitalists. Angel investors are usually affluent individuals who provide capital to small start-up businesses. These individuals often hope for high returns on their investments (Ward, 2000).
Rhoda Allegro can also seek equity financing from venture capitalists. Venture capitalists are also individual who supplies capital for the start-up or expansion of a business venture. Like angel investors, venture capitalists are looking for higher returns on their investments than traditional investments. The main difference between angel investors and venture capitalists is that the former is usually equipped with skills in managing a business while the latter is a professional investor. An angel investor is often interested in adding value to the company aside from profiting from his/her investments (Ward, 2000).
In summary, Rhoda Allegro's business can be financed by formal and informal sources of financing. ...
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