Answer to Question #150693 in Finance for KJ

Question

You and your partner developed a social media App, which became very popular. You soon find more funds are needed to continue growing the business. You and your partner discuss how you can raise some short-term funding. Your partner heard Commercial Papers and CDs are among the vehicles of short-term funding companies often use. Your partner is a nice guy but just finance-naive partly because he did not take the economic as you did. How would you respond to your partner's suggestion? What do you think about their feasibility? (If you think you need more information, make your own assumptions)

Answer 1

The use of Commercial papers as a way of funding to grow the business is feasible as a remedy. The Commercial papers are sold to the investors through CMA, the procedure might be slow as it might s meant to be a short term solution but it is a better way to finance a start-up, you he regulation might derail the process but the end result will be a well financed business. The investors will buy the Commercial Papers at more than the face value, but then receive full face value at the end after acrued interest. The determinant of having to gain more to have the profit and pay the investors is not an assurity.