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Answer :
Securing needed financing is indeed crucial when starting a business. There are various types of financing options available to entrepreneurs, like self-funding, crowdfunding, etc.
a) One option is self-funding or bootstrapping, where the entrepreneur uses personal savings or assets to finance the business. The advantage is that it gives the entrepreneur full control and avoids debt, but it can limit the amount of capital available. Debt financing involves borrowing money from sources like banks or credit institutions, offering flexibility and allowing the entrepreneur to retain ownership. However, it creates an obligation to repay with interest and can be challenging for startups. Equity financing involves selling ownership shares to investors and providing capital without incurring debt, but it means giving up a portion of ownership and decision-making power. Crowdfunding allows entrepreneurs to raise funds from a large number of individuals online, offering a wide reach, but success is not guaranteed, and there may be platform fees or high competition.
b) For Sarah, who wants to open a pet grooming business, I would suggest a combination of self-funding and debt financing. By utilizing personal savings or assets, Sarah can contribute her funds to the business, demonstrating commitment and reducing the need for external financing. Additionally, obtaining a small business loan from a bank or a microfinance institution can provide the necessary capital to cover initial expenses such as equipment purchases, salon setups, and marketing. This approach allows Sarah to maintain control over her business while accessing additional financial resources to support its growth and development.
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