Arranging Capital
Mehta definitely does not have the capital for this. What should he do in order to arrange capital? Borrowing from the bank will not be as easy as thought of because a bank needs credibility and surety of the invested capital. A bank cannot take the risk of investing in a start-up as that may not necessarily yield returns as expected because of multiple factors that can easily cause the failure of the business and loss capital.
Let me tell you that there is a huge amount of risk involved in this type of an investment as the business could even flop due to unseen factors which could catch him unawares leading to a quick erosion of the capital invested. Borrowing from friends, family etc. may also not work out because no one can arrange for this amount of money. What then? How will he raise capital to start and continue his business?
Solution for raising capital
There's a solution to this. Mehta can go to the general public and explain his business to them and make an offer to them to invest in his firm in return for a prospective higher return. As the firm is a start-up the returns will be very high as the business will be in its growth phase. Investors who see value in the business shall invest with the expectation getting higher percentage returns.
Deploy capital
This capital will be used to purchase kitchens and offices, start an advertising campaign to kick-start the expansion. After the investors have invested in the firm Mehta does not anymore hold 100% of the company as there are other owners now who have given Mehta the money to start business with. If by the end of the year if company has made any profits then it shall be distributed among all the owners equally according to the share of each owner.
Patrick Abboud
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