Advantages And Disadvantages Of Sources Of Financing

In general, using external funds, i.e. debt or equity, to finance increasing growth is riskier to the corporation. When issuing debt the company needs to be certain to cover both the repayment of the principal and the interest payments on time (because if they do not this could cause them to have problems securing financing in the future). When issuing additional shares of stock (equity) the value of existing traded stock is diluted (in proportion) and as such the current ownership might lose control (and may even be voted out by shareholders if dilution is substantial enough). Furthermore, with both debt and equity financing, a fast growing company needs to be aware that payments to either may hamper future expansion because payments that need to be send out in the forms of dividends or interest cannot be retained and invested in future projects.

The company position is strong enough so its better that company should use debt financing instead of equity financing.

Debt capital: borrowing someone else’s money to finance the business under the condition that the money plus accrued interest must be paid back in full by an agreed upon date in the future

The four funding sources I would look to use are SBA loans ($300,000) because they promote small businesses, Bank loans (20 years for a total of $1,000,000) because that would be the most obtainable way of getting funding, asking family and friends ($10,000) for help because I would like them extremely involved in my business, and crowdfunding ($5,000) because the more interest in the area means the more potential money that a kick-starter may bring in.

Many businesses use debt financing to achieve their financial goals. Debt financing is raising operating capital by borrowing. Scott Equipment Organization is investigating various combinations of short-term and long-term debt financing in financing their assets. Short-term debt financing has a maturity of one year or less; whereas, long-term debt financing has a maturity of more than one year. Short-term debt is usually used to increase the amount of available working capital that can assist the company with its day-to-day operations, such as purchasing a required piece of equipment or to pay suppliers.

Debt financing is when money is borrowed from a lender that you intended to pay back including interest. Some pros of debt financing are that you are in control of how that capital can be spent. In some cases there will be certain restrictions included from the lender but for the most part you are in control. That is

A new venture takes creativity, motivation, spirt, and capital. The beginning of any venture begins with analyzing ones financial markets and how best to place the vested capital to continuously have the company grow. In many aspects one may purchase an already established business, in this case the understanding of how the loan process works is imperative. One may purchase a building and start a business from the ground up, in this case one will also need to have a great understanding of how mortgages and lending works as well. Many lenders will look into the financial market of the business before considering a loan of any type. In this case good solid numbers and record keeping is important. Understanding that a financial market is based on traders who buy and sell stocks, bonds, derivatives, foreign exchange and commodities (Amadeo, 2015). Successfully analyzing and investigating all financial resources is crucial.

options to obtain the needed capital and how you would approach securing this type of financing.

Although using leverage could create more value for the company, in a great extent, it will increase the risk of the company.

There are several methods that can be used to raise finance. The method a business chooses depends on factors of the business; amount of capital required, the purpose, the financial position of

debt. The steady cash flow generated by the business, short-term bank loans, and the proceeds of the

firm’s financing, for example, issuing or repurchasing stock and borrowing or repaying loans. It also

Sources of finance refers to the ways of gathering various financial sources to meet the financial needs of the business. Furthermore, it states exactly how the companies are gathering and allocating finance to satisfy the requirements of the firm (Chandra, 2011). Firm either belong to existing or new categories that would need a varied amount of finance to meet the long and short term requirements such as construction, inventory, fixed assets and operating expenses (Hally, 2007).

1(a) Financial System is a complex yet connected system that consist of financial intermediaries, financial institutions and financial assets.

Debt and equity financing are your two basic options to raise money for a start-up company or growing business. Debt financing includes long-term loans you get from the bank. Equity financing is private investor money you get in exchange for a share of ownership in the business. Now I want to explain about the advantages and disadvantages of using equity capital and debt capital to finance a small business's growth. The advantages of Debt is financing allows you to pay for new buildings, equipment and other assets used to grow your business before you earn the necessary funds. This can be a great way to pursue an aggressive growth strategy, especially if you have access to low interest rates. Closely related is the advantage of paying off your debt in installments over a period of time. Relative to equity financing, you also benefit by not relinquishing any ownership or control of the business. Interest on the debt can be deducted on the company's tax return, lowering the actual cost of the loan to the company. Raising debt capital is less complicated because the company is not required to comply