Reference no: EM133335819

Case Study: Bill and Fiona began looking at local commercial properties available for rent or purchase. They also began pricing out the necessary operating equipment and envisioning the ideal venture. Assuming that they could obtain financing, they ultimately settled on developing a microbrewery with enough capacity to manufacture and distribute their beer to local bars/restaurants and retail stores in the forms of kegs and cans, respectively.

Family and friends have continued to be extremely supportive of the venture and have offered to provide some financing. Bill and Fiona have found a location available for rent that would suit all of their manufacturing and restaurant needs. In negotiating terms with the commercial property owner, the couple has agreed to a long-term lease deal at a reasonable rent that will also allow them to make necessary leasehold improvements to the facility.

The couple has met with their friend Madeline, a local business attorney, to discuss entity formation options. These options include a sole proprietorship, C Corporation, S Corporation, limited liability company (LLC), and others. After discussing the possibilities at length, they ultimately settled on an LLC with 50/50 ownership under the legal name Rusty Bucket Brewing Co. LLC. They chose the LLC entity structure based upon the limited liability protection for owners, avoidance of double taxation, and ownership and management flexibility.

Throughout the development stage, Bill and Fiona have done extensive research to estimate their costs. Many of their estimates resulted from their real-estate search while others came from a meeting with another local brewery owner. They have also spoken with a number of retail outlets to negotiate pricing and shelf space for product distribution.

Questions:

1. Demonstrate an understanding of entity structure choice and options in funding and lending for small businesses.
2. Compute, analyze, and explain various financial ratios to benchmark a firm's key performance indicators (KPIs).
3. Construct an annual cash budget.
4. Demonstrate written communication proficiency by composing a letter to prospective lenders describing a firm's financing needs and strengths as they relate to the five Cs of creditworthiness.
5. Evaluate a firm's current financial performance and formulate ideas to improve future performance.