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MGT602 - Entrepreneurship - Lecture Handout 42

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PREPARING FOR THE NEW VENTURE LAUNCH: EARLY MANAGEMENT
DECISIONS (Continued….)

CREATING AWARENESS OF THE NEW VENTURE

In the early stages, the entrepreneur should focus on developing awareness of the products offered.

Publicity is free advertising provided by a media outlet. Many local media encourage entrepreneurs to participate in their programs. The entrepreneur can increase the opportunity for getting exposure by preparing a news release and sending it to as many media sources as possible. For radio or TV, the entrepreneur should identify programs that may encourage local
entrepreneurs to participate. Free publicity can only introduce the company. Advertising can be focused on specific customers.

Internet Advertising

The Internet is an excellent medium to create awareness and to effectively support early launch strategies. Creating a website is the most important first stage. The website should indicate: Background of the company. Its products, officers, address, telephone and fax numbers. Contact names for potential sales. Direct sales from the website may also be available. Significant advertising is needed to create interest and awareness of the existence of the website. It is important to change the content of the website as necessary. The entrepreneur may also consider using a banner ad, small rectangular ads similar to billboard ads that appear on browser websites.

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MGT602 - Entrepreneurship - Lecture Handout 34

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BANK LENDING DECISIONS

BANK LENDING DECISIONS

1. Banks are very cautious in lending money, particularly to new ventures.

  1. Commercial loan decisions are made only after the loan officer does a careful review of the borrower.
  2. Decisions are made based on quantifiable and subjective judgments.

2. Bank lending decisions can be summarized by the five C’s-Character, Capacity, Capital, Collateral, and Conditions.

  1. Past financial statements are reviewed in terms of key ratios and the entrepreneur’s capital invested.
  2. Future projections on market size, sales, and profitability are evaluated.
  3. Intuitive factors-Character and Capacity-are also taken into account and become more important when there is little or no track record.

3. The loan application format is generally a "mini" business plan.

  1. This provides the loan officer with information on the creditworthiness of the individual and the ability of the venture to repay the loan.
  2. Presenting a positive business image and following procedure are important in obtaining the funds.

4. The entrepreneur should borrow the maximum amount possible that can be repaid, as long as the prevailing interest rates and terms are satisfactory.

  1. Care must be taken to ensure that the venture will generate enough cash flow to repay the interest and principal on the loan.
  2. The entrepreneur should evaluate the track record and lending policies of several banks in the area.

  3. Read more: MGT602 - Entrepreneurship - Lecture Handout 34