Arnon Dror is an individual whom many aspiring financial professionals regard as their role model. They aim to emulate his achievements as they start their careers in the business world. This Hebrew University MBA graduate has over 2 decades of valuable experience under his belt. During this tenure, Arnon Dror has been able to discharge the office of Vice-President in numerous companies. US Channel Group, Creo Americas, Kodak, Creo Inc. and Presstek are some of these organizations. In each of these establishments, the officials credit him for improving their concern’s fortunes. They consider him to an expert in the field of corporate reconstruction. However, they are quick to acknowledge that he specializes in many diverse areas. These include cash flow management, international taxation, business negotiations, corporate mergers, ERP integration, and internal controls.
Arnon Dror – Is it worthwhile for entrepreneurs to raise funds by issuing equity shares in the market?
This financial expert says entrepreneurs have to raise money from potential investors. They can’t always rely on their own savings. Only then can they use this sum for their businesses. This allows them to conduct their commercial activities without any hassle. On top of this, these businessmen can acquire the relevant assets they require for long-term use. There are 2 ways they can accomplish this task. They can either take out a commercial loan or issue equity shares to the public. Most of them prefer the latter option. He states the following 2 important reasons why they choose to take this course of action:
- No payments to investors unless these businessmen earn adequate profits
This is why equity financing is popular among most businessmen. They are under no obligations to pay their investors any sum of money. Only when they actually earn profits from their activities do these businessmen make such payments. The entrepreneurs can then use the amount they receive to operate and grow their businesses. Unfortunately, this is not the case, if they take out a commercial loan. These proprietors need to repay the principal portion and interest charges at regular intervals. They need to do so regardless of whether they earn any profits or not.
- Risk sharing
Investors buy shares of a business organization not only get access to profits of the concern. These individuals also have to bear the burden of the losses of this establishment. They may have to take this risk when the organization can’t earn any profits or liquidates. For entrepreneurs, this may come as a relief as their personal estates don’t become fully liable. However, it is a situation which they obviously want to avoid at all costs. In the case of commercial loans, they have to repay what they owe at all costs. Otherwise, they could end up facing legal action for their failure to do so. This is a fact which can’t overlook.
Arnon Dror says issuing equity shares in the market can be advantageous for entrepreneurs. The above 2 important reasons for the popularity of this mode of finance proves this fact. However, they need to be willing to forgo total ownership and control of their establishment. Fortunately, it’s a small price to pay for the amount they can raise from the public.