The following report identifies the problems which the company is likely to face and the corresponding solutions to such problems. In order to finance the project, the company needs to acquire short term running finance facility from a bank or any other financial institution. Since the project is of a short term nature, obtaining a short terms running finance facility would be much beneficial rather than acquiring a long term facility. The plus point in acquiring a short term financing facility is that the company would be required to pay mark-up at a lower rate as compared to that if a long term facility would have been acquired.
The company can also raise finance through issuance of shares in the market. The advantage of raising shares in the public market is that the company will avoid the finance charge, which it would have paid on the financing facility. Issuance of capital significantly improves the gearing of the company and strengths its equity. The disadvantage of raising finances through issuance of share capital is that it takes comparatively longer time for the existing and prospective share holder to subscribe to the shares and transfer their money to the company. Moreover, the statutory requirement regarding the floating of shares in the stock market is far more intricate as compared to the procedure involved in the sanctioning of a financing facility. ...Show more