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MGT602 - Entrepreneurship - Lecture Handout 32

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  1. To identify the types of financing available.
  2. To understand the role of commercial banks in financing new ventures, the types of loans available, and bank lending decisions.
  3. To discuss Small Business Administrative (SBA) loans.
  4. To understand the aspects of research and development limited partnerships.
  5. To discuss government grants, particularly small business innovation research grants.
  6. To understand the role of private placement as a source of funds.


Different sources of capital are generally used at different times in the life of the venture.

Debt or Equity Financing

  1. Debt financing involves an interest-bearing instrument, usually a loan, the payment of which is only indirectly related to sales and profits.
    • Debt financing (also called asset-based financing) requires some asset be used as collateral.
    • The entrepreneur has to pay back the amount of funds borrowed plus a fee, expressed in terms of interest.
    • Short-term money is used to provide working capital.
    • Long term debt (lasting more than a year) is frequently used to purchase some asset, with part of the value of the asset being used as collateral.
    • Debt has the advantage of letting the entrepreneur retain a large ownership position and have greater return on equity.
    • If the debt is too great payments become difficult to make and growth is inhibited.
  2. Equity financing offers the investor some form of ownership position in the venture.
    • The investor shares in the profits of the venture.
    • Key factors in choosing the type of financing are availability of funds, assets of the venture, and prevailing interest rates.
    • Usually a combination of debt and equity financing is used.
  3. In a market economy all ventures will have some equity, as all are owned by someone.

MGT602 - Entrepreneurship - Lecture Handout 08

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  1. To identify some key entrepreneurial feelings and motivations.
  2. To identify key elements in an entrepreneur’s background.
  3. To discuss the importance of role models and support systems.
  4. To identify the similarities and differences between male and female entrepreneurs.
  5. To explain the differences between inventors and entrepreneurs.


There is no "true entrepreneurial profile"- entrepreneurs come from many educational backgrounds, family situations, and work experiences. A potential entrepreneur may presently be a nurse, secretary, assembly line worker, sales person, mechanic, home maker, manager or engineer. A potential entrepreneur can be male or female and of any race or nationality.

Locus of Control

One concern people have when forming is whether they will be able to sustain the drive and energy required to form something new and to manage the new enterprise and make it grow. While research results are inconsistent, internal control seems to be a characteristic of entrepreneurs.
Internal beliefs appear to differentiate entrepreneurs from the general public, but not from managers. Managers and entrepreneurs both have an internality tendency.

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