1. CHAPTER 13 DISCUSSION QUESTIONS
1) Explain the difference & the advantages/disadvantages of
equity capital & debt capital.
2) Discuss the following sources of equity capital:
A) Angels
B) Corporate Venture Capital
C) Venture Capital Companies
3) Explain the following federal loan programs aimed at small
businesses:
A) EDA
B) HUD
C) USDA
D) SBIR
E) STTR

2. CAPITAL
”ANY FORM OF WEALTH EMPLOYED TO PRODUCE MORE
WEALTH”
-3 MAIN FORMS
1) CASH
2) INVENTORY
3) EQUIPMENT

3. ENTREPRENEURS NEED 3 DIFFERENT TYPES OF CAPITAL
1) FIXED CAPITAL
2) WORKING CAPITAL
3) GROWTH CAPITAL

4. 1) FIXED CAPITAL
”CAPITAL NEEDED TO PURCHASE A COMPANY’S
PERMANENT OR FIXED ASSETS”
-MAIN TYPES OF PERMANENT/FIXED ASSETS:
1) LAND
2) BUILDINGS
3) EQUIPMENT
-MONEY INVESTED IN FIXED ASSETS TENDS TO BE FROZEN
BECAUSE IT CANNOT BE USED FOR ANY OTHER PURPOSE

5. 2) WORKING CAPITAL
”CAPITAL NEEDED TO SUPPORT A COMPANY’S SHORT-
TERM OPERATIONS”
-CURRENT ASSETS MINUS CURRENT LIABILITIES
-WORKING CAPITAL IS NORMALLY USED TO:
1) BUY INVENTORY
2) PAY BILLS
3) FINANCE CREDIT SALES
4) PAY WAGES & SALARIES
5) TAKE CARE OF UNEXPECTED EMERGENCIES

6. 3) GROWTH CAPITAL
”CAPITAL NEEDED TO FINANCE A COMPANY’S GROWTH
OR EXPANSION IN A NEW DIRECTION”
-GROWTH CAPITAL FINANCES:
1) EXPANSION OR PURCHASING NEW BUILDINGS
2) HIRING ADDITIONAL WORK FORCE
3) INCREASING INVENTORY

7. EQUITY CAPITAL VS DEBT CAPITAL
FINANCING THE CAPITAL REQUIREMENTS OF A START-UP
BUSINESS

8. DEBT CAPITAL
”THE FINANCING THAT A SMALL BUSINESS OWNER HAS
BORROWED & MUST REPAY”
-FEW ENTREPRENEURS HAVE ENOUGH SAVINGS TO
COVER START-UP COSTS, SO THEY MUST RELY ON SOME
FORM OF DEBT CAPITAL TO LAUNCH THEIR COMPANIES
-PRIMARY ADVANTAGE:
-ENTREPRENEURS KEEP TOTAL OWNERSHIP &
CONTROL OF BUSINESS
-PRIMARY DISADVANTAGE:
-SMALL BUSINESS LOANS ARE DIFFICULT TO
OBTAIN

9. EQUITY CAPITAL
”CAPITAL THAT REPRESENTS THE PERSONAL INVESTMENT OF
THE OWNER(S) OF A COMPANY”
-SOMETIMES CALLED RISK CAPITAL
-PRIMARY ADVANTAGE:
-DOES NOT HAVE TO BE PAID BACK LIKE A LOAN DOES
-PRIMARY DISADVANTAGE:
-THE ENTREPRENEUR MUST GIVE UP SOME, SOMETIMES
MOST, OF THE OWNERSHIP IN THE BUSINESS TO
OUTSIDERS

10. SOURCES OF EQUITY FINANCING

11. ANGELS
”WEALTHY INDIVIDUALS WHO INVEST IN BUSINESS START-
UPS IN EXCHANGE EQUITY STAKES IN THE COMPANIES”
-TODAY, THE LARGEST SOURCE OF EXTERNAL FINANCING
FOR COMPANIES IN THE START-UP PHASES

12. VENTURE CAPITAL
”FUNDS MADE AVAILABLE FOR STARTUP FIRMS WITH
EXCEPTIONAL GROWTH POTENTIAL”
CORPORATE VENTURE CAPITAL
-LARGE CORPORATIONS THAT INVEST IN FLEDGLING
COMPANIES, MOST OFTEN THOSE IN THE PRODUCT
DEVELOPMENT & SALES GROWTH STAGES
VENTURE CAPITAL COMPANIES
-PRIVATE, FOR-PROFIT COMPANIES THAT PURCHASE
EQUITY POSITIONS IN YOUNG BUSINESSES THEY BELIEVE
HAVE HIGH-GROWTH & HIGH-PROFIT POTENTIAL

13. THE BOSTON BEER COMPANY: BREWING THE AMERICAN DREAM
-MICROLOANS ($500-$25,000): Food and beverage small business owners can get the
capital needed to expand or start a business, purchase inventory or equipment, market a
business, pay licensing fees, etc.
-SPEED COACHING: Small business owners can meet with The Boston Beer Company's
employees to gain customized business advice on a range of topics: marketing,
distribution, accounting, etc.