ems the most secured form of raising enough money to start the business, but in case the price of the assets suddenly drops, it may be practically impossible to get enough capital for the organization. Banks, on the other hand, expects that some strict requirements are fulfilled before they could award any loans (Mentre 1984). It is not always possible to secure a loan from banks because the requirements are often many. Therefore, it is better to rely on the sale of assets to raise the needed capital for the commencement of the organization. The assets that would be sold to obtain this capital include a block of flat and a six-month-old salon car.
The organization has a limited number of daily operations being a trading one and small-scale in nature. The major activities involve purchasing, stockpiling and distributing orders to customers. The organization is not involved in price control and does not engage in market manipulation as would a big trading company. Therefore, choosing to finance the organization using the capital raised through the sale of personal assets appears to be safe and would not threaten business continuity (Doughty 2000). The fact is that whenever banks refuse to grant loan applications, the business activities at the organization would be slow down. No entrepreneur that is profit-oriented would want his/her business enter a phase of financial dryness: a critical condition when it would be seriously difficult to obtain the necessary funds to keep operating. Relying on the capital raised from personal assets would solve this unique problem.
Task 4 (The Cost of Finance): The cost of finance for the sales of my asset is, in principle, the total expenses made in the course of selling them. Below is the exact cost of finance that came up during the selling processes:
The cost of finance shown above is moderate compared with the cost I would have paid to obtain similar amount of loan from a bank or other financial institutions. Even though the ...
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