|Type of paper:||Essay|
|Categories:||Business Financial management|
The agency that I am going to use is called Smart Clean which is one of the successful companies in the world. The company has been gaining revenue steady in the past five years which enables its operations to run smoothly. The company wishes to expand and reach new territories to make even more profit. The company had a positive impact in the area and wanted to continue with the same on the new venture. Going off the fact that it has significantly decreased the initial loan and have excellent personal and business credit, your expansion desire is within reach. With that said, to take over those three additional territories you will need capital, and that looks like I will be asking approximate $50,000. I have thought of various options that I think are viable and will make this organization a better and successful company. The paper will outline the financing options that can benefit the organization and realize vision and mission.
One of the ways to finance the smart clean is by borrowing of debt. It is the primary method of funding of the company operations (Bogath, 2017). The funds borrowed will enable the operation to be conducted without hindrances. The capital borrowed is returned with interest which is either per monthly or annual. It means that if the financial situation of the company changes, you are still held responsible for paying that money back. There are two types, secured and unsecured. Secured which is divided into long-term and short-term debt where creditors have some asset against the company. This is a less risky option from the creditor standpoint, and the interest rate is usually lower (Bao & Kolasinski, 2016). However, with unsecured debt the creditor does not have a resource or asset against the company, therefore, increasing the risk factor thus creating a much higher interest rate for the borrower. With debt financing, a significant advantage is that you don't have to give up any shares of your company for the borrowed sum. It is an excellent way to utilize an aggressive growth strategy to help purchase equipment, buildings, and other assets you may need with your expansion. It is going to help both human and resources due to the benefits of working with it.
The method mentioned above is advantageous, but an individual is compelled to pay regardless of the company financial situation. So if you expand into those new territories, and they don't take off as expected, those payments towards paying off the $50,000 will still be necessary. If not you may risk bankruptcy or repossession from the bank. Also, with debt financing keep in mind that you are borrowing against future profit. It means that instead of all the benefit gained from the expansion and business sales going back into the business a portion will be used for debt payments. Making it critical to understand and control the debt to income ratio (Cassar, Ittner, & Cavalluzzo, 2015).
The company is going to engage various community partners to succeed in the market. One of the community partners that are going to be used by the company is the enterprise foundation. It is a community partner that helps in fund sponsor. It is going to help the organization boost its operations through additional funds. Another is National city CDC. It is a national community center that aids in new markets ("Company Overview of National City Community Development Corporation," 2018). Also, it will provide guidance on how their research will run operations. It will conduct own research and provide information on how the organization is going to fit in the market. Also, it will give multicultural competence and working ethics of the organization. Human administration and services will be kept on the check.
Smart clean is expanding its operations, and I think debt financing is an appropriate way to fund the organization because it is an established company which is successful in the region. It is not a new business that is trying to fit it is an organization which has a history and has experience which will enable it to generate revenue. The company has been doing it for the last five years without hindrances. Hence, the company will need investors coming in offering additional business advice or knowledge in exchange for ownership of your company. The fact that you have excellent credit can help you achieved a lower interest rate as well (Aronoff & Ward, 2016). You have also proved that you have financial slack and flexibility to take on additional debt. Currently, your operating costs including the expansion to the three new territories are $75,000; this is an estimated fixed cost meaning that you don't project it to change. The cost of each cleaning job only costs you $35, and you are charging your client $250. That shows that you are making a profit of $215 on every sale. You can take on more risk when it comes to your financing option, which is another reason why debt financing will be sufficient for your needs. Having an established business and knowing what your cash flow versus expenses is are evidence that you can take on an additional debt payment. This will pay off in the long run because the new territories gained will provide more revenue to help pay off that newly acquired debt. Once paid off, all the profits generated can go back into the business helping to lead to more growth and development.
Aronoff, C., & Ward, J. (2016). Family business ownership: How to be an effective shareholder. Springer.
Bao, J., &Kolasinski, A. (2016). Why Do Firms Issue Secured Debt?.
Bogath, A. (2017). Opportunities and Limitations of Bussiness Planning of SME. Management, Enterprise and Benchmarking in the 21st Century, 9.
Cassar, G., Ittner, C. D., &Cavalluzzo, K. S. (2015). Alternative information sources and information asymmetry reduction: Evidence from small business debt. Journal of Accounting and Economics, 59(2-3), 242-263.
Company Overview of National City Community Development Corporation. (2018). Retrieved from https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapid=4507866
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Business Essay Sample: Funding Proposal and Community Partners. (2022, Aug 26). Retrieved from https://speedypaper.com/essays/funding-proposal-and-community-partners
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