There are two types of financing transactions: partnership and debt-based instruments (see Contracts and Transactions).
The advantage of the former for an entrepreneur is that he/she is not bound to financial obligation, but rather shares the profit with the investor according to the partnership’s results. On the other hand, the advantage of the latter is that the entrepreneur is not required to involve the investor in enterprise management and decision-making. However, this advantage comes at a cost of a financial debt that you must repay when due, regardless of the results of the enterprise. Consequently, it is best not to pursue this transaction except if you are confident in your ability to repay the debt.
It is best to avoid debt-based transactions if your proposal is still in the entrepreneurial pre-launch stage, since the start-ups in this initial stage often encounter cash flow difficulties.
Ensure that you have a robust and well thought-out business plan, particularly the market situation in terms of product demand, prices nd forms of competition, assumptions on which project performance was projected in the upcoming period, in terms of sales and profitability, the start-up team, and expenditures.
Limit your business plan to details that concern the investor.
Interact with the investors, and choose an investor who shares the same vision, particularly in partnership transactions. Most importantly, do not limit your selection criteria of an investor to approval of financing.
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