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Write a 10 pages paper on sources of finance and financial planning. Hire purchase is one of the ideal options for owing to the machine. It denotes a fixed period installment loan which is secured by
Write a 10 pages paper on sources of finance and financial planning. Hire purchase is one of the ideal options for owing to the machine. It denotes a fixed period installment loan which is secured by the purchasing item as collateral. In this case, the buyer has the possession of the assets but not the ownership during the period of repayment. Again leasing can be proved to be another suitable option as with this mechanism the owners need to obtain only contractual, tax-deductible and periodic payment.
Bank borrowings are a vital financial source for the companies. Short term loans for up to a maximum of three years may be in the form of an overdraft, where interest is charged at a variable rate on the principal amount. Medium-term loans are generally for a period of three to ten years. The rate of interest thus charged for a medium-term loan will be a set of margin that depends on the credit standing and the riskiness of the borrower. Briefly, a banks loan is offered with a fixed amount for a fixed term with regular fixed repayments. The interest of the loan for a simple bank loan is always less than the interest paid for a bank overdraft (Food and Agriculture Organization of the United Nations, n.d.).
A bank overdraft is a form of a settled cash-borrowing limit prearranged with a bank. It furnishes a flexible way of managing cash flows and thereby provides one with short-term funds if one doesn’t have adequate money (TheSite, n.d.).
The company is currently having an overdraft facility of £3, 00,000 which is on an unsecured basis. And the company is willing to go for a medium-term loan for a repayment period of 10 years for an amount of £2, 00,000. As a means of sourcing finance overdraft chosen is perfectly all right since there is larger flexibility on both the amount borrowed and interest paid. But alternatively, hire purchase can be suggested being a form of installment credit which will help the owner of the company to afford the machinery with a facility of smaller amount of repayment over a gradual period .of time with absolute ownership at the time of final payment of credit. .
