Online Stock Trading Made Easy
An In-Depth Analysis Of Initial Public Offering: IPO Versus Business Loans Supposedly you are one of the members of the board of directors of a certain company. The board realized that there is a need for additional capital infusion since the company registers a consistent growth rate in terms of production and marketing aspects. Such growth needs to be addressed in order to avoid later problems that may even result to the mismanagement of the company and possible bankruptcy instead of a progressive corporate output. There are various suggestions raised by your colleagues. Some suggest that since the company has enough funds, it could be used to finance a business loan that will be used to sustain the company’s growth. Others suggest that the company must go public in order to attract several investors who will infuse the needed capital for the growing operation of the company. As a member of the board of directors, which way will you pursue? Remember that there are two options that the company can take—first is entering into a loan agreement wherein you need to present any corporate assets as security to the loan. Second, the company could be listed into an IPO or initial public offering, determine the number of shares that the company wants to sell to the public, and the rest will just follow. Both options can raise revenues, yet the question will not just be about generating additional revenues at all. The question will now be like this: ―Which of them provides an advantage to the company and its stakeholders?‖ Let us scrutinize the options carefully by going through the first option. The process is simple: once the company found a lending institution that will agree to lend the company with the needed amount, the company through its high executives and officials will enter a contract with a lending company and make an agreement on the conditions prior to the approval of the loan. It will include securing any company assets with equivalent value of the loan against the company and monthly repayments within a specified period of time with applied interest.
© Wings Of Success
Page 53 of 53
