Introduction
Success of a business organization largely depends on its choice of financial sources. Right choice of financial sources will lead the business to a healthy and profitable position. A business might need finance at any stage of its development. We will now identify and analyze some available sources of finance for Rachel plc which needs money for its expansion purposes.
Issue of New Shares
Issuing new shares of the company is one good way of raising long-term finance for the business. We can issue new and additional shares to the public.The advantage of this source is thatwe won't have to make payments to investors until the business can afford them. It is a permanent source of capital with low risk. Increasing the invested capital …show more content…
Typically, it is easier to obtain lease financing than loans from commercial lenders. It makes cash flow management easier because we will have to pay regularly at the same rate. It is cheaper and easier than some other sources because we don't need to pay the entire amount upfront. Leasing is inflation friendly: as the costs go up over five or ten years, we still be paying the same rate as when we began the lease, therefore making our money stretch farther. Although leasing allows us to avoid paying a large lump sum, over a long period of time it often works out considerably more expensive. Moreover, we will have an obligation to continue making …show more content…
Trade credit is the credit extended to us by the suppliers who let us buy now and pay later. It is a short-term, external source of finance. It is assumed an essential tool for financing growth since it is effectively a free source of finance. It is flexible because the amount of credit reflects the value of business done with a supplier. It is low cost as the trade creditors don't charge interest on the amount outstanding, unless payment is delayed.
Bank Loans
In any time of difficulties banks are there to provide loans. As a grown up company Rachel plc would not have any problem to gain bank-loans. A bank loan can be secured quickly and easily; providing a good cash flow backup. But banks often levy a number of restrictions on the transaction. Loans also carry high interest and fees.
Venture Capital
As Rachel plc has a good track record and making good profits, it can attract venture capitalist to invest in the company. Besides investing large sum of money, they will also make available their business expertise which will also help to strengthen your business. But they will inevitably keep an additional pressure for growth and profits. So, venture capital can be a high risk strategy.
Grants-EU/Government
The European Union, the Eurobonds and the government provide grants to businesses often to help create jobs in areas of high unemployment. We can utilize this
Success of a business organization largely depends on its choice of financial sources. Right choice of financial sources will lead the business to a healthy and profitable position. A business might need finance at any stage of its development. We will now identify and analyze some available sources of finance for Rachel plc which needs money for its expansion purposes.
Issue of New Shares
Issuing new shares of the company is one good way of raising long-term finance for the business. We can issue new and additional shares to the public.The advantage of this source is thatwe won't have to make payments to investors until the business can afford them. It is a permanent source of capital with low risk. Increasing the invested capital …show more content…
Typically, it is easier to obtain lease financing than loans from commercial lenders. It makes cash flow management easier because we will have to pay regularly at the same rate. It is cheaper and easier than some other sources because we don't need to pay the entire amount upfront. Leasing is inflation friendly: as the costs go up over five or ten years, we still be paying the same rate as when we began the lease, therefore making our money stretch farther. Although leasing allows us to avoid paying a large lump sum, over a long period of time it often works out considerably more expensive. Moreover, we will have an obligation to continue making …show more content…
Trade credit is the credit extended to us by the suppliers who let us buy now and pay later. It is a short-term, external source of finance. It is assumed an essential tool for financing growth since it is effectively a free source of finance. It is flexible because the amount of credit reflects the value of business done with a supplier. It is low cost as the trade creditors don't charge interest on the amount outstanding, unless payment is delayed.
Bank Loans
In any time of difficulties banks are there to provide loans. As a grown up company Rachel plc would not have any problem to gain bank-loans. A bank loan can be secured quickly and easily; providing a good cash flow backup. But banks often levy a number of restrictions on the transaction. Loans also carry high interest and fees.
Venture Capital
As Rachel plc has a good track record and making good profits, it can attract venture capitalist to invest in the company. Besides investing large sum of money, they will also make available their business expertise which will also help to strengthen your business. But they will inevitably keep an additional pressure for growth and profits. So, venture capital can be a high risk strategy.
Grants-EU/Government
The European Union, the Eurobonds and the government provide grants to businesses often to help create jobs in areas of high unemployment. We can utilize this