Debt funding and equity funding are two main sources in regards to securing capital for one’s business. When taking out long or short term loans, the business owner relies on debt funding. Debt funding is helpful because it offers the business tax advantages such as “the tax deduction from interest payments” (Triantis, 2013, p. 2042). However, some business owners try to avoid accumulating debt because they do not know if their businesses will be successful. On the other hand, equity funding comes from interested investors. It offers the new business credibility if the investor is high profile, but some business owners are wary to use equity funding because they have to share ownership with the investors. Nevertheless, in regards to a start-up movie theater childcare business, it may be feasible to obtain investors because it is directly connected to a successful theater and their clientele, so equity funding would be ideal.
Equity funding often comes from personal funds, friends, family, or outside investors. Kuratko and Hornsby (2009) have recommended that “The first place to look for funding is within the business itself” (p. 176). Because a children’s care center would likely bring new and repeat customers, it would offer the movie theater a return on investment. Therefore, this business venture would ask if theater owners or current investors were interested parties.
In order to create a childcare center within the theater, funding would have to cover costs such as renovation, supplies, and employees. Farrell (2007) has noted that one should plan for an area that would “accommodate at least 80 children” (no pag.). Therefore, Farrell (2007) advised the initial cost would be approximately $30,000. This would cover renovation but additional funding would be necessary for the supplies and trained staff. Because the employees would be responsible for child care, they would have to have the appropriate credentials, so they would be a separate entity from the current movie theater employees. On the other hand, supplies such as books, games, movies, and toys can be donated from the community and current moviegoers. Subsequently, the majority of the funding would go towards renovation.
Farrell, M. (2007, April 5). The fundamentals of running a child care center (B. Nelson, Ed.). Forbes. Retrieved from http://www.forbes.com/
Kuratko, D., & Hornsby, J. S. (2009). New Venture Management. Upper Saddle River, NJ: Prentice-Hall.
Triantis, G. (2013). Exploring the limits of contract design in debt financing. University of Pennsylvania Law Review, 61(7), 2041-2061.