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Entrepreneurial Finance, Third Edition: Finance and Business Strategies for the Serious Entrepreneur, 3rd Edition
book

Entrepreneurial Finance, Third Edition: Finance and Business Strategies for the Serious Entrepreneur, 3rd Edition

by Steven Rogers, Roza Makonnen
April 2014
Beginner content levelBeginner
416 pages
8h 39m
English
McGraw-Hill
Content preview from Entrepreneurial Finance, Third Edition: Finance and Business Strategies for the Serious Entrepreneur, 3rd Edition

7

Debt Financing

INTRODUCTION

Bill Gates has a rule that Microsoft, rather than incurring debt, must always have enough money in the bank to run for a year with no revenues.1 In 2013, Microsoft had $77 billion in cash on its balance sheet.2 Unfortunately, 99.9% of entrepreneurs will never be able to emulate this financing plan. Therefore, they must be willing to pursue and accept debt financing.

Debt is money provided in exchange for the owner’s word (sometimes backed up by tangible assets as collateral as well as the personal guarantees of the owner) that the original investment plus interest at a predetermined fixed or variable rate will be repaid in its entirety over a set period of time.

As we saw in Chapter 6, banks have been by far the ...

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Publisher Resources

ISBN: 9780071825399