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Equity Financing Alternatives for Small Business: A Review of Best Practices in the United States

5. Framework for Review

SMEs in different industries progress along different "financing paths". For example, a biotechnology firm may progress along a Research-Development-Clinical trials-IPO/ Private placement path, while a manufacturing start-up may progress along a Research-Development-Bench-Pilot-Production-Scaleup-IPO path. In both cases, financing options become more readily available in the latter stages when products or services are closer to becoming a commercial reality and/or when positive earnings are evident.

The following generic Framework for Review model, which represents the most usual circumstances for a SME seeking equity financing, has been created to provide a structure of reference for the report. It will allow for the classification of the different forms of equity financing (Finance Agents) as well as the different facilitators, programs, regulations, and policies (Flow Incentives and Flow Support Systems) that affect investment decisions at different stages in an SMEs growth cycle.

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