Aaron Hoffman grew up in the restaurant business. His father, William Wogie Hoffman, operated several pizza...

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Aaron Hoffman grew up in the restaurant business. His father, William "Wogie" Hoffman, operated several pizza restaurants in Philadelphia. When Aaron opened his Philly cheesesteak restau- rant, he named it Wogies in honor of his father. Aaron and his wife decided to expand their restaurant by opening a small bakery to bake their own rolls in the basement of the cheesesteak shop.. They ordered the equipment and began the expansion. However, the bank loan they had assumed would come through never materialized. The couple needed $50,000, and they needed it fast, to pay for the expansion they had already begun. Having no success getting financing through a traditional bank, the couple turned to a merchant cash advance on credit card sales. Although they got the funding they needed, it was at much higher closing costs and interest rate than they would pay for a typical bank loan. A typical merchant cash advance charges 20 to 25 percent of the loan as a closing fee in addition to the equivalent of a 30 to 60 percent annual interest rate.. Although not happy with paying a 20 percent fee on the loan amount at closing, Hoffman says that he had no alternative. 1. Which of the funding sources described in this chapter do you recommend that and Aaron Hoffman con- sider for financing their businesses? Which sources do you recommend they not use? Why? 2. What can entrepreneurs do to increase the probability that bankers will approve their loan requests? 3. Work with a team of your classmates to brainstorm ways these entrepreneurs could attract the capital they need for their businesses. What steps do you recommend they take before they approach the potential sources of funding you have identified? Aaron Hoffman grew up in the restaurant business. His father, William "Wogie" Hoffman, operated several pizza restaurants in Philadelphia. When Aaron opened his Philly cheesesteak restau- rant, he named it Wogies in honor of his father. Aaron and his wife decided to expand their restaurant by opening a small bakery to bake their own rolls in the basement of the cheesesteak shop.. They ordered the equipment and began the expansion. However, the bank loan they had assumed would come through never materialized. The couple needed $50,000, and they needed it fast, to pay for the expansion they had already begun. Having no success getting financing through a traditional bank, the couple turned to a merchant cash advance on credit card sales. Although they got the funding they needed, it was at much higher closing costs and interest rate than they would pay for a typical bank loan. A typical merchant cash advance charges 20 to 25 percent of the loan as a closing fee in addition to the equivalent of a 30 to 60 percent annual interest rate.. Although not happy with paying a 20 percent fee on the loan amount at closing, Hoffman says that he had no alternative. 1. Which of the funding sources described in this chapter do you recommend that and Aaron Hoffman con- sider for financing their businesses? Which sources do you recommend they not use? Why? 2. What can entrepreneurs do to increase the probability that bankers will approve their loan requests? 3. Work with a team of your classmates to brainstorm ways these entrepreneurs could attract the capital they need for their businesses. What steps do you recommend they take before they approach the potential sources of funding you have identified?