FINANCING FINANCING METHODSMETHODS

FINANCEFINANCEWhere To Turn:Where To Turn:

FriendsFriends Trade Credit: Repay within 30-90 daysTrade Credit: Repay within 30-90 days Loans From BanksLoans From Banks Commercial Paper: Borrow from Bus.Commercial Paper: Borrow from Bus. Factoring: Sell A/R. High InterestFactoring: Sell A/R. High Interest Pledging InventoriesPledging Inventories Line of Credit: Pre-approved Bank LoanLine of Credit: Pre-approved Bank Loan Flooring: “Big Ticket” ItemsFlooring: “Big Ticket” Items

ISSUING STOCKS AND ISSUING STOCKS AND BONDSBONDS

STOCKSSTOCKSAdvantages:Advantages:

No interest chargesNo interest chargesDoes not affect borrowingDoes not affect borrowingEquity capital never needs to be repaidEquity capital never needs to be repaid

Disadvantages:Disadvantages:Shared ownership, and perhaps loss of controlShared ownership, and perhaps loss of controlDividends are not an expense itemDividends are not an expense item

BONDSBONDSAdvantages:Advantages:

No loss of controlNo loss of controlInterest payments are tax-deductibleInterest payments are tax-deductible

Disadvantages:Disadvantages:Money must be repaidMoney must be repaidBonds are a debt and can affect borrowingBonds are a debt and can affect borrowing

TYPES OF BONDSTYPES OF BONDS

Term: Most commonTerm: Most common Sinking Fund: Requires $ to be set asideSinking Fund: Requires $ to be set aside Callable: Can retire before maturity dateCallable: Can retire before maturity date Debenture: Excellent financial reputationDebenture: Excellent financial reputation Serial: Mature at different datesSerial: Mature at different dates Junk Bonds: High riskJunk Bonds: High risk