Assume the following situation: Your business is 3 years old sole proprietorship. It has sales of $300,000 and net income after taxes of $40,000. Your total assets are $100,000 and your total liabilities are $2,000.
You want to hire a fourth employee and outfit them with a computer and the tools necessary to do the job. You’ll also need a bigger space, with enough offices to accommodate everyone and to meet with clients. Of course, you’ll need furniture too. So you want to raise $50,000 to expand your business.
Explore your options:
a. Would it make sense to issue a bond? Why or why not?
b. Would it make sense to issue stock? Why or why not?
c. Would it make sense to apply for a bank loan? Why or why not? What would you need to provide the bank in order for them to consider the loan?