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Implement capital investment - Assignment Example

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Loans are the primary source of financing. Of late, the credit market has become too tight to the point of being non-existent. It has led to companies not getting loans that prove to be a significant…
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IMPLEMENTING CAPITAL INVESTMENT DECISIONS Companies look for funding to implement their capital investment plans. Loans are the primary source of financing. Of late, the credit market has become too tight to the point of being non-existent. It has led to companies not getting loans that prove to be a significant challenge (Crosson & Needles, 2014). Companies deal with the problem by seeking alternative ways to obtain funding. These alternatives are as discussed herein. FactoringIn factoring, a company sells its accounts receivable to a financial institution usually referred to as a factor.

The financial institution advances the funds on a portion of the receivables, mostly 80% of their face value. The 20% that remains is the known as the reserve and is held by the factor. The face value of the borrower and reserve difference is the amount that the borrower gets. Factoring is quick and has been adopted by many companies to help them meet their capital investment plans (Alternatives to Loans, n.d.).Hedge fund lendersMostly referred to as new corporate ATMs, Hedge fund lenders have been the choice for many companies especially the high-risk firms.

The size of the loan offered depends on the quality of the pitch that the borrower will make. Due diligence is used to determine whether or not to lend. With Hedge fund, lenders access to money is quick.Merchant cash advance.Companies have turned to merchant cash advance to get money so as to implement their capital investment plans. Merchant cash advance give companies’ cash advanced based on the corporation’s monthly credit card transactions. It best suits companies with high monthly credit card transactions (Alternatives to Loans, n.d.).

Sale and leasing of assetsIn some cases, a company may require selling some of the assets that are less useful to the company. In other instances, it may lease out some of its assets at a favorable price. The income obtained will help in the implementation of the capital investment plan.ReferencesAlternatives to Loans, n.d. (n.d.).Crosson, S., & Needles, B. (2014). Managerial Accounting (10th ed. ed.). Mason, OH: Southwestern Cengage Learning.

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