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There is no one correct method to fund a sport business. Some
people acquire a sport business through inheritance and do not
need any fundsto become owners. This is the case for many
professional team owners, such as the Rooney family, who have
owned the Pittsburgh Steelers
for several generations. Other owners have tapped numerous
sources such as their credit cards, relatives, and bank loans to
keep a business alive.
Each business is different and requires its own unique blend of

4. financing. The various funding techniques will be addressed in
this chapter.
The total number of options and techniques that can be used to
obtain funds is limitless. Some people have made their fortunes
through luck,
whereas others have relied on hard work. Arthur Rooney, the
famed owner of the Steelers, bought the franchise for $2,500 in
1933. It is rumored
that he obtained the money for the franchise by winning
$250,000 at the horse track in 1932 (Pro Football Hall of Fame,
2007). John Moores,
former owner of the San Diego Padres, founded BMC Software
in 1980. By working hard, designing innovative products, and
making a strong
marketing push, he made a fortune (“Company,” 2012). With
these funds, he purchased the Padres. Dallas Mavericks owner
Mark Cuban;
Microsoft cofounder, Portland Trail Blazers, and Seattle
Seahawks owner, Paul Allen; and Los Angeles Clippers owner,
Steve Ballmer, made
their fortunes in computer software before buying their teams.
A person lucky enough to win the lottery could use their
winnings to start a business. Former athletes have taken the
money that they earned
in professional sport and used those funds to launch or buy a
business. One example is Magic Johnson, who turned his
winning form and smile
into a major fortune in real estate and movie theaters. In 2012,
he became a part owner of the Los Angeles Dodgers in a record-
breaking, $2.15
billion deal. Another basketball legend, Michael Jordan, turned
his fortune into owning a majority share of the Charlotte
Hornets and has made
hundreds of millions of dollars from his collaboration with Nike

5. on the Jumpman brand. In yet another example, Mario Lemieux
was owed a
fortune by the Pittsburgh Penguins and was the largest debt
holder for the team. He purchased the team in bankruptcy
proceedings. Most
recently, retired baseball legend Derek Jeter used the fortune he
accrued throughout his playing career to become a part owner of
the Miami
Marlins.
Although this chapter and chapter 10 on stocks and bonds
highlight for-profit businesses, we make some references to
funds used by
government and tax-exempt businesses. As with for-profit
businesses, both government and nonprofit organizations can
use countless techniques
to raise funds. One of the major differences between
government and nonprofit organizations is the opportunity to
receive gifts and the potential
tax consequences associated with such funding techniques.
Most fund-raising for sport businesses follows established
patterns that countless organizations have used for years. This
chapter highlights
the basic approaches to raising funds without necessarily having
to incur significant costs or sell owners’ equity. Early in the
chapter we examine
basic funding sources for starting a business, such as personal
bank loans, credit cards, and government assistance. The
chapter then covers open
markets and short-term borrowing options, followed by several
long-term borrowing options. The chapter concludes with an
analysis of funding
options for minority-owned businesses, including advice on how
to obtain funding.

6. WHERE THE MONEY COMES FROM
Most consumers have faced a financial crisis in which they
needed money but found that sources of funds were lacking.
Some people can
approach their parents and ask for a loan. Money sometimes
comes from an inheritance or in the form of a raise. Increased
monetary streams are
sometimes expected—such as an annual cost-of-living salary
increase to keep a salary at pace with inflation. At times money
might not come in
when it is expected. You might anticipate receiving a tax refund
by a certain date and have to change your plans significantly if
a delay occurs.
But what happens when you need a substantial amount of money
and your likelihood of receiving a major gift is astronomically
small? You need
to analyze alternative approaches for raising the needed capital.
Not all capital needs arise from emergencies. Numerous capital
structuring changes occur because of anticipated growth—
growth that can
occur only through the exploration of various capital financing
options. This chapter deals with the various capital options
available to those
seeking to raise needed capital. We give special attention to
individual borrowing, SBA (Small Business Administration)
loans, commercial
lending, and venture capital. Other chapters will cover issuing
various types of stocks, issuing bonds, and obtaining capital
assistance from the
government. There is no one correct method of raising funds,
and this chapter presents the diverse techniques available.
Personal Resources
Sometimes people accumulate money from a current job with
the intention of someday starting their own businesses. Often

7. these sums are
wholly inadequate for that purpose. Industry professionals
highlight the need to set aside at least two years’ worth of
living expenses in
preparation for starting your own business. This sum is
necessary because most new full-time businesses take at least a
year, and sometimes
many years, to earn enough profit to pay the business owner a
salary. Proper financial planning can help eliminate numerous
hurdles that might
arise during the formative years of a business. But the planning
process needs to begin long before a business starts up, and
sufficient capital
reserves are required to sustain the business through cyclical
and seasonal downturns.
If you do not have enough cash or investments that could be
liquidated to start the business, you might consider a home loan.
Home equity
financing requires a borrower to use their house as collateral
when obtaining a loan from a bank or other lending institution.
The loan amount is
based on the equity that the borrower has in the home. Suppose
that you have a house that is worth $300,000 on the market
today. You paid
$180,000 for the house 10 years ago, with $30,000 down and a
$150,000 mortgage. You have paid off $60,000 on the mortgage
and still owe
$90,000. The difference between the value and the amount owed
is $210,000, which represents the equity that you have in the
house and is the
maximum amount that you could borrow from a lending
institution.
Home equity loans are traditionally favored over other loans
because they carry a lower interest rate. Furthermore, some

8. banks are willing to
lend more than 100% of a home’s value, depending on what the
loan proceeds will be used to purchase. New businesses are
highly speculative,
and only 20% of new businesses survive. Therefore, some banks
require substantial equity before loaning to a new business;
established
businesses with significant financial history are more reliable,
and owners of these businesses can obtain larger mortgages.
Although most financial advisers do not recommend borrowing
on a credit card because of the high interest rates, credit cards
can also
generate funds from which to start a business. But anyone using
this method of borrowing must be careful to repay the debt as
quickly as
possible because the interest charges will negate any potential
benefits that could have accrued from not having to approach
other lenders such as
https://platform.virdocs.com/rscontent/epub/507558/OEBPS/xht
ml/chapter9.html?#sp54818904
Person
al use o
nly, do
not repr
o
2021-02
-10
lamar.d

9. [email protected]
student
.ashford
.edu
banks. Furthermore, the high rate of small business failures
should serve as a warning that a business owner could be paying
off debts for years
after a business fails. With a high interest rate, the repayment
obligation could force an individual into bankruptcy.
The key to using credit cards is to maintain a good credit rating.
Especially if using personal credit cards, borrowers need to be
vigilant in
ensuring that purchases and repayments do not hurt their credit
rating. A credit rating can plunge if the credit card bills are not
paid on time or if
payment is always late (see How Credit Card Applicants Are
Rated sidebar).
Can the Government Help You Get a Bank Loan?
A spotty credit history might limit a person’s ability to obtain
bank financing. The government, however, has developed
several programs to help
small businesses borrow funds, even if the owner does not have
an unblemished credit history. The federal government realized
the need for
helping small businesses in the 1950s. In 1953 it created the
Small Business Administration to “aid, counsel, and protect the
interest of
Person
al use o

10. nly, do
not repr
oduce.
2021-02
-10
lamar.d
[email protected]
student
.ashford
.edu
Person
al use o
nly, do
not repr
oduce.
2021-02
-10
lamar.d
[email protected]
student
.ashford
.edu
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al use o

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oduce.
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-10
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student
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.edu
Person
al use o
nly, do
not repr
oduce.
2021-02
-10
lamar.d
[email protected]
student
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.edu
Person
al use o

12. nly, do
not repr
oduce.
2021-02
-10
lamar.d
[email protected]
student
.ashford
.edu
ot repro
duce.
0
There is no one correct method to fund a sport business. Some
people acquire a sport business through inheritance and do not
need any fundsto become owners. This is the case for many
professional team owners, such as the Rooney family, who have
owned the Pittsburgh Steelers
for several generations. Other owners have tapped numerous
sources such as their credit cards, relatives, and bank loans to
keep a business alive.
Each business is different and requires its own unique bl end of
financing. The various funding techniques will be addressed in
this chapter.
The total number of options and techniques that can be used to
obtain funds is limitless. Some people have made their fortunes
through luck,

13. whereas others have relied on hard work. Arthur Rooney, the
famed owner of the Steelers, bought the franchise for $2,500 in
1933. It is rumored
that he obtained the money for the franchise by winning
$250,000 at the horse track in 1932 (Pro Football Hall of Fame,
2007). John Moores,
former owner of the San Diego Padres, founded BMC Software
in 1980. By working hard, designing innovative products, and
making a strong
marketing push, he made a fortune (“Company,” 2012). With
these funds, he purchased the Padres. Dallas Mavericks owner
Mark Cuban;
Microsoft cofounder, Portland Trail Blazers, and Seattle
Seahawks owner, Paul Allen; and Los Angeles Clippers owner,
Steve Ballmer, made
their fortunes in computer software before buying their teams.
A person lucky enough to win the lottery could use their
winnings to start a business. Former athletes have taken the
money that they earned
in professional sport and used those funds to launch or buy a
business. One example is Magic Johnson, who turned his
winning form and smile
into a major fortune in real estate and movie theaters. In 2012,
he became a part owner of the Los Angeles Dodgers in a record-
breaking, $2.15
billion deal. Another basketball legend, Michael Jordan, turned
his fortune into owning a majority share of the Charlotte
Hornets and has made
hundreds of millions of dollars from his collaboration with Nike
on the Jumpman brand. In yet another example, Mario Lemieux
was owed a
fortune by the Pittsburgh Penguins and was the largest debt
holder for the team. He purchased the team in bankruptcy
proceedings. Most
recently, retired baseball legend Derek Jeter used the fortune he

14. accrued throughout his playing career to become a part owner of
the Miami
Marlins.
Although this chapter and chapter 10 on stocks and bonds
highlight for-profit businesses, we make some references to
funds used by
government and tax-exempt businesses. As with for-profit
businesses, both government and nonprofit organizations can
use countless techniques
to raise funds. One of the major differences between
government and nonprofit organizations is the opportunity to
receive gifts and the potential
tax consequences associated with such funding techniques.
Most fund-raising for sport businesses follows established
patterns that countless organizations have used for years. This
chapter highlights
the basic approaches to raising funds without necessarily having
to incur significant costs or sell owners’ equity. Early in the
chapter we examine
basic funding sources for starting a business, such as personal
bank loans, credit cards, and government assistance. The
chapter then covers open
markets and short-term borrowing options, followed by several
long-term borrowing options. The chapter concludes with an
analysis of funding
options for minority-owned businesses, including advice on how
to obtain funding.
WHERE THE MONEY COMES FROM
Most consumers have faced a financial crisis in which they
needed money but found that sources of funds were lacking.
Some people can
approach their parents and ask for a loan. Money sometimes
comes from an inheritance or in the form of a raise. Increased

15. monetary streams are
sometimes expected—such as an annual cost-of-living salary
increase to keep a salary at pace with inflation. At times money
might not come in
when it is expected. You might anticipate receiving a tax refund
by a certain date and have to change your plans significantly if
a delay occurs.
But what happens when you need a substantial amount of money
and your likelihood of receiving a major gift is astronomically
small? You need
to analyze alternative approaches for raising the needed capital.
Not all capital needs arise from emergencies. Numerous capital
structuring changes occur because of anticipated growth—
growth that can
occur only through the exploration of various capital financing
options. This chapter deals with the various capital options
available to those
seeking to raise needed capital. We give special attention to
individual borrowing, SBA (Small Business Administration)
loans, commercial
lending, and venture capital. Other chapters will cover issuing
various types of stocks, issuing bonds, and obtaining capital
assistance from the
government. There is no one correct method of raising funds,
and this chapter presents the diverse techniques available.
Personal Resources
Sometimes people accumulate money from a current job with
the intention of someday starting their own businesses. Often
these sums are
wholly inadequate for that purpose. Industry professionals
highlight the need to set aside at least two years’ worth of
living expenses in
preparation for starting your own business. This sum is
necessary because most new full-time businesses take at least a

16. year, and sometimes
many years, to earn enough profit to pay the business owner a
salary. Proper financial planning can help eliminate numerous
hurdles that might
arise during the formative years of a business. But the planning
process needs to begin long before a business starts up, and
sufficient capital
reserves are required to sustain the business through cyclical
and seasonal downturns.
If you do not have enough cash or investments that could be
liquidated to start the business, you might consider a home loan.
Home equity
financing requires a borrower to use their house as collateral
when obtaining a loan from a bank or other lending institution.
The loan amount is
based on the equity that the borrower has in the home. Suppose
that you have a house that is worth $300,000 on the market
today. You paid
$180,000 for the house 10 years ago, with $30,000 down and a
$150,000 mortgage. You have paid off $60,000 on the mortgage
and still owe
$90,000. The difference between the value and the amount owed
is $210,000, which represents the equity that you have in the
house and is the
maximum amount that you could borrow from a lending
institution.
Home equity loans are traditionally favored over other loans
because they carry a lower interest rate. Furthermore, some
banks are willing to
lend more than 100% of a home’s value, depending on what the
loan proceeds will be used to purchase. New businesses are
highly speculative,
and only 20% of new businesses survive. Therefore, some banks
require substantial equity before loaning to a new business;

17. established
businesses with significant financial history are more reliable,
and owners of these businesses can obtain larger mortgages.
Although most financial advisers do not recommend borrowing
on a credit card because of the high interest rates, credit cards
can also
generate funds from which to start a business. But anyone using
this method of borrowing must be careful to repay the debt as
quickly as
possible because the interest charges will negate any potential
benefits that could have accrued from not having to approach
other lenders such as
https://platform.virdocs.com/rscontent/epub/507558/OEBPS/xht
ml/chapter9.html?#sp54818904
Person
al use o
nly, do
not repr
o
2021-02
-10
lamar.d
[email protected]
student
.ashford
.edu
banks. Furthermore, the high rate of small business failures

18. should serve as a warning that a business owner could be paying
off debts for years
after a business fails. With a high interest rate, the repayment
obligation could force an individual into bankruptcy.
The key to using credit cards is to maintain a good credit rating.
Especially if using personal credit cards, borrowers need to be
vigilant in
ensuring that purchases and repayments do not hurt their credit
rating. A credit rating can plunge if the credit card bills are not
paid on time or if
payment is always late (see How Credit Card Applicants Are
Rated sidebar).
Can the Government Help You Get a Bank Loan?
A spotty credit history might limit a person’s ability to obtain
bank financing. The government, however, has developed
several programs to help
small businesses borrow funds, even if the owner does not have
an unblemished credit history. The federal government realized
the need for
helping small businesses in the 1950s. In 1953 it created the
Small Business Administration to “aid, counsel, and protect the
interest of