ENTREPRENEURIAL FINANCE
DEBT FINANCING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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No loss of ownership
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No interest payments
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No voting rights
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No involvement in decision making
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Detailed explanation-1: -All of the following are advantages of debt financing except which one? It results in loss of ownership control of the business. The cost of debt financing is generally cheaper than equity financing. Owners do not have to share the potential gains of the business, since debt only requires repayment of the amount owed.
Detailed explanation-2: -Qualification: The company and the owner must have acceptable credit ratings to qualify. Fixed payments: Principal and interest payments must be made on specified dates without fail. Businesses that have unpredictable cash flows might have difficulties making loan payments.
Detailed explanation-3: -Advantages of debt financing As the business owner, you do not have to answer to investors. Terms – you may be able to negotiate fixed interest rates and flexible repayment options. Tax deductions – unlike private loans, interest, fees and charges on a business loan are tax deductible.