Alpha Beta | Options and risks of financing promising businesses


At present, there is no comparison between the environment prepared for entrepreneurs and promising small and medium enterprises at all levels, specifically in the organizational and financial aspects, and what they faced less than a decade ago, which does not many incentives, had no support. and possible facilities to prove their presence on the ground, and for its growth and availability of the necessary capacity to expand its activity.

The wide options that emerging and promising entrepreneurs have in terms of financing their businesses do not mean that they have reached the end of the road of hardship and problems for them, but in turn it has a parallel rise in the grades of risk to the same extent, or even higher than has become easy in terms of financing. In its various forms recognized during the present period, which requires entrepreneurs and anyone planning to undertake this ambitious experiment with all its chances of success and risks, to know that the path is not only with roses and optimistic dreams paved, as many may think, but you will find it full of many thorns, challenges and risks, and the greatest dependence to go through this path successfully and efficiently is based on the efficiency and good decision-making by the entrepreneur, who has decided to transform the idea of ​​his project into an entity embodied in the earth, and strive to grow and expand it to what God wants him to accomplish. In the future,

The biggest challenge for entrepreneurs has shifted from the task of obtaining the necessary funding for their start-up projects, which was previously one of the biggest challenges or obstacles, to how to manage their projects properly and efficiently, and the mechanism of hiring and managing the financial resources at their disposal through the various current funding sources, the most important and prominent of which are: Angel investor, individual or group, crowdfunding solutions, venture capital investors (companies, investment funds), direct loans from finance agencies (banks, finance companies)). Each type of them also enjoys certain benefits for entrepreneurs and promising businesses. In return for these benefits, according to each source of funding, there are also necessary and necessary requirements and responsibilities, and there is no space or opportunity for the entrepreneur and promising businesses. to escape from wearing them, and the absolute necessity of fulfilling them completely without deficiency.

This is the most important aspect for entrepreneurs and promising businesses, and the aspect that should be placed at the forefront of the priorities of emerging entrepreneurs, as it is the first source whose neglect or lack of action threatens the success of the small and medium business , and failure to handle it with sufficient professionalism and experience will result in the business falling into a swamp of scratches. This is something that the General Authority for Small and Medium-sized Enterprises (Monsha’at) has paid close attention to through its awareness campaign, “The Right Finance”, which aimed to add more information and explanations needed for any entrepreneur to the beginning of the road to the establishment of his promising project. Therefore, before undertaking any of the financing options for its establishment, it is the responsibility of the entrepreneur to carefully examine and research each type of “its benefits, responsibilities” and to use the available experiences before making any decision on any of the financing options “angel investor individually or as a group, financing solutions.” Collective, venture capitalists “big companies, investment funds”.

Where the angel investment is characterized as an investor or a group of individual investors or a specific system that provides initial financing for the businesses, all in exchange for ownership interests in the facility. The value of investment financing here can reach about 1.0 million riyal or slightly higher, and this type is characterized by its rapid deposit for investment in the account of the invested facility, which means that it comes in time with the first phases of the establishment of the facility, and supports the speed of decision making, in addition to the ability to provide various aspects of technical support, experience and necessary relationships.

In terms of crowdfunding solutions, it is one of the modern and innovative ways that has worked to apply financial technology in the field of raising and providing the necessary funding for entrepreneurs and small and medium enterprises, through the process of selling of ownership shares in the facility for the benefit of a wide segment of investors by displaying them on modern private platforms. The maximum amount of investment financing available under this type is approximately 10.0 million riyal, according to the regulations in force in the Kingdom, within one year over two investment rounds, which is ten times more than the first type of financing, but it takes longer deposited at the facility It is also characterized by the ability to rely on it at different stages of the life of the enterprise, and according to the development of its business and activity. When it comes to decision making, the entrepreneur has the choice to involve the shareholders in it or not.

Finally: With regard to brave investment, represented by large companies and investment funds specialized in this field, whereby those financing parties offer it as a high-risk investment for them, in small and medium enterprises, based on the assessment of venture capital investors that this enterprises possess extremely promising and growing opportunities for Others in the long run, and this type is characterized by the absence of a maximum size of its investment financing, and it exceeds the maximum limits of the above financing options, and it guarantees a mixture of monetary and technical support and utilize the market power of the financier to the benefit of the facility, but the investment deposit takes a longer time Compared to the above financing options, the entrepreneur will also lose the largest share under this option. of its establishment, in addition to the loss of most of its decision-making ability compared to the above options, and it is certainly one of the “if you will” tax on obtaining investment financing Exceeds 10.0 million riyal as the maximum saving can be from the previous options above!

From the above: Entrepreneurs and small and medium enterprises will find themselves in front of various investment financing options, characterized by certain benefits, and subject to restrictions and controls in return.The business is a good study of those financing options before undertaking any of them. , and a good identification of what is needed for a good and most effective implementation of its investment idea among those financing options, and the selection of the most suitable among them, not based on the amount of funding expected to be raised, but based on his accurate understanding of his abilities, skills and experience first And based on what he actually needs for his upcoming project, which he strives to grow and maximize its size and activity.

Quoted from Al-Eqtisadiah

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