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What are the factors affecting your company's method of financing?

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Question ajoutée par Abdullah Mahhaden, CFA, CPA , Assurance Manager , Grant Thornton
Date de publication: 2013/06/15
Habibullah Usman
par Habibullah Usman , General Manager , Venkys Italy Marmo S.r.l.

While there are only two basic options (debt and equity), there are many variations available under each option, each with its own benefits and drawbacks.
 Purpose of the financing? Is the money to be used for investments or capex, etc..
Any lender or financier will want to be privy to that information.
 Urgency of the financing? This will affect the cost of funding.
 Income This affects the repayment capacity or return on investment for the lenders’/equity stake holders.
 Assets Assets, or collateral, are a safety backup for lenders.
If for some reason your company can't pay the loan back, the lenders will liquidate the company's assets for payment.
 How is the business leveraged? The current leverage structure of the business must be considered.
Specifically, if the debt-to-equity ratio of the company is high, debt should be avoided.
 Business risks, country risks to which the financier is exposed? Performance of the industry or industry risks, country risks.
The greater the risk the financier is exposed to, the greater capital will cost the company, be it through ownership interest or interest rates.

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