Introduction

Read the short caselet attached below and write a synopsis of why Paul is facing a dilemma in regard to starting his venture. Please use ONLY your own words. Your answer should NOT be more than one page in length. PLAGIARISM WILL BE HEAVILY PENALIZED.

Paul McTaggart sat at his desk. Behind him, the computer screen flickered with the home page of his exciting new website: abductee.net. In front of Paul were two folders. One was clearly labeled "Bank", and contained a funding proposal from the Business Development Bank of Canada; the other was marked "Venture Capital", and held a proposal from a possible partner.

Debt or Equity

Now it was Thursday. In front of Paul were two folders. One was clearly labeled "Bank", and contained a funding proposal from the BDC. The other was marked "Venture Capital" and held Jerry's proposal. Paul stared at the folders. He had to make his decision tonight.

Paul opened the "Bank" folder, and re-read the funding proposal. The terms were steep: the loan was over 5 years at 5% above prime rate. In addition, Paul had to agree to purchase $3500 in consulting services and pay a monthly service charge of $50. On the other hand, he would own all of the stock in Abduction Productions and so would make all of the profits if the venture was a success. Paul wondered if he really wanted to straddle his new company with a lot of debt and payments in excess of $1,000 per month?

Next, Paul opened the "Venture Capital" folder and re-read Jerry's offer. Half the company for $25,000 in equity. Jerry's money would be in the form of a shareholder's loan which had to be paid back before Paul could re-coup his own investment. And there was a buy-sell arrangement that laid out the conditions under which either shareholder could buy out the other. Paul knew that this offer would strengthen his financial picturebut did he really want a partner?

It was going to be a long night.

Paul knew he had to make a decision: which folder was he was going to go with. He had to make the decision soon if his website was going to be more than just a home page. However, neither of the folders contained the financing package he was looking for. Paul stared at the folders and thought back to the events that had led up to this moment of decision.