Imagine A Better Company LLC, which has six members. Five of the shareholders own 7 percent each. Jacinta owns the remaining portion of the company. A Better Company needs $250,000 for equipment, inventory, and working capital to expand into a new market. Jacinta does not want to give up controlling interest in the firm. What percent of her ownership can she sell and retain majority ownership? What would she be valuing the company at if she did so? Name three potential sources (specific types of investors/lenders) that might provide the equity or some form of debt.
Here we have been provided with the information that in the firm ,there are six members. Five of the shareholders own 7 percent each. Jacinta owns the remaining portion of the company.
so it will be as follow
| Member | % |
| 1 | 7 % |
| 2 | 7 % |
| 3 | 7 % |
| 4 | 7 % |
| 5 | 7 % |
| Jacinta | 65 % |
Jacinta does not want to give up controlling interest in the firm.so she should keep 50% of securities with her to retain the controll in the firm
Jacinta can sell 15 % share
Name three potential sources (specific types of investors/lenders) that might provide the equity or some form of debt.
Following are three souces that provides equity or some form of debt
(1) Equity Offerings
In this situation, the business sells stock directly to the public. Depending on the circumstances, equity offerings can raise substantial amounts of funds.
(2)Banks and Other Commercial Lenders
Banks and other commercial lenders are popular sources of business financing. These are usually hard to come by for a start- up business. Once the business is underway and profit and loss statements, cash flows budgets, and net worth statements are provided, the company may be able to borrow additional funds.
(3)Commercial Finance Companies
Commercial finance companies may be considered when the business is unable to secure financing from other commercial sources. These companies may be more willing to rely on the quality of the collateral to repay the loan than the track record or profit projections of your business. If the business does not have substantial personal assets or collateral, a commercial finance company may not be the best place to secure financing. Also, the cost of finance company money is usually higher than other commercial lenders.
