| Then, there are those businesses that lose | | | | debt, or you can sell part of your business, |
| money year after year, and it can be a | | | | your equity, by selling shares. As your |
| mystery how they continue to amass investment | | | | business becomes more established, it will be |
| capital and continue to grow. These are | | | | easier to get bank loans. Often companies |
| intangible values called "goodwill" that | | | | selling goods sell part of their accounts |
| actually, in an adequate accounting | | | | receivable at a discounted rate of |
| statement, is put on the books. If the | | | | 10-20-percent or more. This is called |
| "Youtube" website is purchase for $1.5 | | | | factoring (of your accounts receivable), and |
| billion dollars, it has to be explained to | | | | has the advantage of accelerating a companies |
| the stockholders of the purchasing company, | | | | cash flow cycle. That is the time cycle it |
| why this money has disappeared from their | | | | takes for money invested in producing new |
| assets, to buy a company that has never | | | | inventory to be sold, and for cash to be |
| earned one dollar in the positive column. | | | | collected and deposited. Another source of |
| This value is chalked up to "goodwill" that | | | | loans is the U.S. Small Business |
| the purchasing company has acquired. They | | | | Administration. It is worthwhile to check |
| have acquired a brand name and a distribution | | | | with the local Chamber of Commerce if there |
| network that will be (hopefully) profitable | | | | are other local or state government sponsored |
| enough to warrant the initial large | | | | loans available to you. For example, many |
| investment that was spent. | | | | states and local governments have been making |
| | | | loans and even grants to promote energy |
| How is it possible for businesses to lose | | | | efficiency and conservation is small |
| money year after year? This is a process | | | | businesses in the recent period. |
| facilitated by raising capital. Some small | | | | |
| businesses in the start of phase have great | | | | Equity financing can include attracting |
| difficulty raising money on the capital | | | | capital from investors of various sorts. Of |
| markets or from investors. The owner is | | | | course, you can also lose control of some or |
| obliged to borrow money from his home equity, | | | | all aspects of the business if you shell |
| his credit cards, and any other personal | | | | shares, but this can be a rapid way to raise |
| assets he or she has. | | | | capital. This is how firms that seem to lose |
| | | | money for years continue, because they are |
| In general, there are two ways of raising | | | | seen as developing an attractive brand or |
| capital. You can get a loan, and go into | | | | product. |