Page 3: Sources of finance
Choosing the most appropriate source of finance for the size and needs of the enterprise is important:
- Sole traders: Duncan's first ice cream van was an example of this type of business - owned and run by just one person who takes all responsibility and all the profit. The small investment for the van was covered by personal funds. This is typical of many start-up businesses.
- Partnership: This is usually owned by between 2 and 20 people. The joint owners share responsibility and the profits. Duncan went into partnership for the first care home. The investment was much bigger and needed borrowing from a bank.
- Limited companies may be private, for example, a family business, or public, where anyone can buy shares in the company. To build more care homes, Duncan used a mix of profits, borrowings and offering shares in the company. This was achieved by 'going public' andfloating the company on the stock exchange.
The start-up costs of Duncan's business ventures varied in size. There are several options available for financing new business start-ups and for expanding established businesses. Duncan believes entrepreneurs must demonstrate commitment to the business. When assessing whether to invest in new enterprises such as those in Dragons' Den, Duncan wants to know how much of their own money new entrepreneurs are willing to put in. If they are not willing to risk their own money, Duncan almost always declares himself out.