Financing Your Business

Starting a business can be a daunting task, but it is also an exciting opportunity for students to explore their entrepreneurial spirit. However, to get a business off the ground, a significant amount of money is often required. This is where financing through loans can be an essential part of the process. Through this activity, we will explore the benefits of compound growth and how it can lead to increased profits for businesses. This activity will also discuss the initial investment amount and growth rate and how these factors can affect the final profit earned.

Another crucial aspect of this activity is discussing how to choose the right loan amount and interest rate for a business. This will include evaluating the loan amount and duration based on the size and scope of the business and determining the appropriate interest rate based on the length of the loan and the overall risk involved.

Storyline: The students will be starting a new business with a starting investment of $30,000. Their goal is to maximize their profits by utilizing compounding for 10 years. In order to achieve higher profits, they may require additional initial capital, which can be obtained through a loan from a fictitious bank named BizBank.

BizBank provides different interest rates for various loan amounts, and the interest rate also varies depending on the length of the loan term. Taking out a loan that is too large may reduce their profit due to the increased interest payments, while a loan that is too small may not provide sufficient initial capital to start the business. The students will engage in worksheet activities to determine the optimal loan amount and duration for their business, ensuring maximum profit at the end of the 10-year period.

This activity will provide students with a practical understanding of financing a business and the factors to consider when taking out a loan. By the end of this activity, students will have a strong grasp of the importance of financing and how it can make or break the success of a business. It will also equip them with the skills necessary to make informed decisions when it comes to financing their own entrepreneurial ventures in the future.