Financing Options Name Institution Lecturer Course Date Prime Financial Consultants, Ainsdale Cresent, Middlesex. May 1, 2012. Newbe Enterprises, Fifth Street, Rochester, New York. Dear Sir, RE: Financing Options I am hereby writing in response to your concern regarding the best financing option you should pursue to facilitate taking your business to the mass market…
Finally, I have recommended the best financing options you should consider. Financing Requirements Before embarking on the types of financing that should be considered, it is worth noting something on financing requirements. The entrepreneur (or business management) should determine the amount of financing that is required to carry out the intended activities (going mass market), which is necessary in planning and execution of business operations properly (Gutterman, 1994, p. 2). Presumably, Newbe had determined the amount of capital required at the initial stages of the business formation. However, it is exceedingly crucial to review initial estimates periodically owing to the fact that the scope of business activities often change with time. Further, periodic review of the initial financing (capital) estimates enables businesses to cater for unforeseen factors, such as abrupt changes in the cost of raw materials. Business financing requirements and resources for securing the required capital depend on the size of the business under consideration and the industry (line of business) in which the business under consideration is operating (Gutterman, 1994, p. 2). ...
8-13). Probably, the degree of economic participation of the financial provider is the first decision that Newbe should make when selecting the financing strategy to pursue. Newbe should evaluate the degree of economic participation that the financial provider will have on the business enterprise during the financing period. For example, if Newbe considers common stocks as the source of required finance, the business should understand that the investors (common stock holders) would share profits with the entrepreneur while taking part in making various business decisions. On the contrary, if Newbe considers obtaining a loan from a financial provider, such as a bank, the financial provider will only demand the amount given plus interest on loan, but the provider will not be involved in decision-making. Therefore, if the decision-making procedure is a key issue that should be left to the enterprise management, Newbe should consider financial sources that do not require the financial provider to be involved in business decision-making (Alterowitz and Zonderman, 2007, p. 8). Newbe should also consider the cost of funds to current operations while deciding the financing alternative to pursue. It is apparent that every financial provider will expect full return to financial aid given in terms of cash and/or assets. In many, almost all, cases, the financial provider will demand to be compensated for the use of financial aid in terms of interest (bank loan) and dividend (stockholders) among others. Therefore, Newbe should assess how business cash flow requirements will be affected by any commitment to pay dividends or interest to ...
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