| Course | MGT 401 Small Business: Structure, Planning, Funding (MGT/401) |
|---|---|
| Week | 5 |
| Paper type | Small business funding analysis |
| Length | about 1,067 words, 4 double-spaced pages plus title page and references |
| Format | APA 7 student paper |
| School | University of Phoenix |
| Program | BS in Business |
| Updated | October 2026 |
Free sample paper for MGT 401 Week 5
Bank Loan, SBA Guarantee, Microloan, Crowdfunding or an Investor? Comparing Funding Options for Copper Kettle Roasters
[Student Name]
University of Phoenix
MGT/401: Small Business: Structure, Planning, Funding
Week 5 Assignment
[Instructor Name]
[Date]
Copper Kettle Roasters and all figures are composites written for a model paper; loan terms are illustrative and program rules should be confirmed with lenders.
The business plan for Copper Kettle, our composite roaster, asks for $250,000 in bank financing, with the owners contributing $80,000. Before meeting the bank, Dana Whitfield and Jordan Price want to understand all their funding options, including ways to borrow less or share risk. How a small business is funded shapes how much risk the owners carry, how much control they keep and how much cash leaves the business each month for years. This paper compares funding options and recommends a mix.
How Much and for What
The total need is $330,000: $85,000 for the roaster and ventilation, $95,000 for leasehold improvements, $40,000 for café equipment and furniture, $30,000 in working capital and an $80,000 cushion for the first year's losses and slow months. Matching sources to uses is a basic principle: long-lived equipment can be financed over many years, while working capital needs flexible credit.
How Small Businesses Actually Raise Money
Berger and Udell (1998) argued that sources of money change as a firm ages: at first owners lean on their own funds, family and friends, then add bank credit and trade credit as they build a record, with outside equity mainly for firms with high growth potential. Robb and Robinson (2014), using a large survey of new U.S. firms, found that bank loans and other formal debt were more important to startups than commonly believed, often backed by the owners' personal assets.
Owner Equity
Dana and Jordan will contribute $80,000. Owner money signals commitment to lenders, who usually expect owners to put in 10 to 30 percent of project costs. It carries no interest but puts the owners' savings at risk.
Conventional Bank Loan
A conventional term loan of $175,000 over seven years at about 9 percent would cost about $2,820 a month. Banks may require larger down payments, shorter terms and collateral beyond the equipment. Given Copper Kettle's short history, approval is uncertain.
SBA 7(a) Loan
An SBA 7(a) loan is made by a bank with a partial government guarantee, which allows longer terms, up to 10 years for equipment and working capital and longer for real estate. A $175,000 loan over 10 years at about 10 percent would cost about $2,310 a month, lower than the conventional loan because of the longer term. Guarantee fees and paperwork add cost and time. Owners with 20 percent or more ownership must personally guarantee the loan.
Equipment Financing
The roaster's manufacturer works with a lender offering equipment financing, using the roaster as collateral. Financing $70,000 over five years at about 11 percent would cost about $1,520 a month. Approval is easier because the equipment secures the loan.
Microloans
SBA microloans of up to $50,000 are made through nonprofit intermediaries, which often provide business coaching. A microloan could cover working capital, but its size is limited.
Family Loan
Dana's parents have offered a $40,000 loan. Family loans can be flexible, but should be documented with a promissory note and interest at least at the minimum rate set by tax rules, and they risk family relationships if the business struggles.
Rewards Crowdfunding
Copper Kettle's loyal market customers make rewards crowdfunding attractive. Mollick (2014) studied thousands of crowdfunding projects and found that success was associated with signals of quality and preparation, such as a video and frequent updates, and that most funded projects delivered, though many were late. A campaign offering roast-of-the-month subscriptions and naming rights on the roaster could raise $20,000 to $35,000 and demonstrate demand to the bank.
Angel Investors
An angel investor might invest $100,000 for a share of ownership. At a valuation of $500,000 before the investment, the investor would own about 17 percent. Angels usually expect high growth and an eventual sale, which does not match a neighborhood café and wholesale business intended to provide a living.
Venture Capital
Venture capital funds companies that can grow very large very quickly. A local coffee business does not fit that profile, and venture terms would impose growth expectations the owners do not share.
Revenue-Based and Other Options
Revenue-based financing, in which a lender is repaid through a fixed share of monthly sales until a set amount is reached, is another option for businesses with steady revenue. It requires no fixed payment in slow months, but the total cost is often higher than a bank loan. Merchant cash advances, sometimes marketed to cafés, can be very expensive and should be avoided. Supplier credit from green coffee importers, typically 30 days, helps working capital at no cost if paid on time.
Seasonality and Cash Flow
Coffee sales in Albuquerque dip in summer, when students leave and heat reduces hot drink sales, while holiday gift sales of beans rise in November and December. Debt payments are the same every month, so the funding plan must cover the summer gap. Cold brew and iced drinks will help, but the working capital cushion and a later line of credit are the main protection. Monthly cash projections show the lowest point in August of year one, with about $18,000 in cash remaining under the recommended mix.
Comparing the Options
On cost, owner equity and crowdfunding have no interest but carry other costs; SBA and equipment loans have moderate interest; angel equity is the most expensive if the business succeeds. On control, debt preserves ownership while angel investment shares it. On risk, all loans require personal guarantees.
The Recommended Mix
The recommended mix is $80,000 owner equity, $25,000 from crowdfunding, $70,000 equipment financing for the roaster and a $155,000 SBA 7(a) loan for buildout and working capital, totaling $330,000. Combined monthly payments would be about $3,570 initially, within projected cash flow by year two. A $75,000 line of credit would be requested later, once the business has a track record.
Backup Plan
If the SBA loan is delayed or reduced, the family loan of $40,000 and a smaller café buildout would allow wholesale and subscriptions to grow while the café waits. The phased model from Week 2 makes this possible.
Conclusion
Copper Kettle's funding should match its stage and goals: owner money, debt guaranteed or secured by equipment and crowdfunding that turns loyal customers into early supporters. Angel and venture capital do not fit a business built to provide a good living rather than a fast exit. A backup plan protects the business if financing falls short.
References
Berger, A. N., & Udell, G. F. (1998). The economics of small business finance: The roles of private equity and debt markets in the financial growth cycle. Journal of Banking & Finance, 22(6-8), 613-673. https://doi.org/10.1016/S0378-4266(98)00038-7
Mollick, E. (2014). The dynamics of crowdfunding: An exploratory study. Journal of Business Venturing, 29(1), 1-16. https://doi.org/10.1016/j.jbusvent.2013.06.005
Robb, A. M., & Robinson, D. T. (2014). The capital structure decisions of new firms. The Review of Financial Studies, 27(1), 153-179. https://doi.org/10.1093/rfs/hhs072
What the MGT 401 Week 5 instructions ask
The final MGT 401 assignment generally asks students to evaluate funding options for a small business and recommend a strategy. Typical requirements include identifying how much money is needed and for what, comparing debt and equity sources such as personal funds, family loans, bank and SBA loans, microloans, equipment leasing, crowdfunding, angel investors and venture capital, discussing costs, control and risks of each and recommending a funding mix. Some prompts ask students to connect funding to the business plan. Show the amounts, calculate payments or ownership given up, match sources to uses and cite sources in APA format.
How this MGT 401 Week 5 example is built
A coffee roaster needing $330,000 must decide how much to borrow, from whom and whether to give up ownership, and the paper compares the choices. Research shows that young firms rely heavily on owner money and bank debt rather than outside equity. The paper compares a conventional loan, an SBA 7(a) loan, a microloan, equipment financing, a family loan, rewards crowdfunding and angel investment. It calculates monthly payments and the ownership an investor would expect. Venture capital does not fit a café and wholesale business. The recommended mix is owner equity, an SBA-guaranteed loan, equipment financing and a crowdfunding campaign for the roaster, with a family loan as backup, and checks that monthly payments fit within cash flow even in the slow summer months.
MGT 401 Week 5 grading rubric: where the points go
Strong funding papers match sources to the business's needs, stage and risk, and they show the costs of each option with numbers. Instructors credit a clear statement of the total need and each planned use, an accurate comparison of debt and equity, calculations of payments or dilution, attention to personal guarantees and control and a recommendation that combines sources sensibly. Explaining why some options, such as venture capital, do not fit shows judgment. Using research on how small businesses actually finance themselves adds credibility. A funding table and APA citations finish the paper. Papers that show the monthly payment burden of the recommended mix against projected cash flow make the strongest case, since lenders and instructors alike want to know the business can carry its debt in a slow month, not just an average one.
MGT 401 Week 5 help: mistakes to avoid
Students often list every funding source without saying which fits. Match each to the business's stage, size and growth plans. Another frequent gap is ignoring cost; show interest, fees or the share of ownership given up. Students also recommend venture capital for businesses that will not grow fast enough to interest investors. Explain the fit. Avoid treating crowdfunding as free money; campaigns take work and must deliver rewards. Address personal guarantees and risk to the owners. Include a backup plan. Finally, connect the funding request to the business plan's use of funds and cash flow projections. Test whether payments can be made in the slowest months.
Related MGT 401 sample papers
Other MGT 401 week samples
- MGT 401 Week 1: Evaluating the Business Concept
- MGT 401 Week 2: Competitive Business Model
- MGT 401 Week 3: Comparing Forms of Ownership
- MGT 401 Week 4: Drafting the Business Plan
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MGT 401 Week 5 questions, answered
What does MGT 401 Week 5 usually cover?
It usually covers small business funding options, including savings, family loans, bank and SBA loans, microloans, equipment financing, crowdfunding, angel investors and venture capital, ending with a recommended funding mix.
Where can I find a free MGT 401 Week 5 sample paper?
The complete funding analysis for a coffee roaster, with payment calculations and a recommended mix, is on this page with notes. MGT 401 students can get a free first draft of their funding paper.
What is an SBA 7(a) loan?
A loan made by a private lender and partly guaranteed by the U.S. Small Business Administration, which reduces the lender's risk and can make longer terms available to small businesses that might not qualify otherwise.
What is the difference between debt and equity financing?
Debt must be repaid with interest but leaves ownership with the owners. Equity does not require repayment but gives investors a share of ownership and future profits, and often some control.
Is crowdfunding a good option for small businesses?
Rewards crowdfunding can raise modest amounts and test demand for consumer-facing businesses with loyal followers, but campaigns require preparation and promotion, and backers must receive promised rewards.
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