Most of the companies that thrive and do so well in the world economy today are mostly funded by the owners and borrowed funds. The borrowed funds are either long term or short-term debt financing. It becomes the top management priority to come up with ways and means to invest the money in order to get high returns at the end of the investments. That is why they ought to be careful when choosing the most viable project to invest in because these decisions are neither reversible nor irreversible once they are made. A firm should reach the greatest length with little or minimum resources. Tremblay Ltee Company is on the verge of catering for its needs by borrowing long or short-term funds to increase its overall share in the market.
Tremblay has forecasted $1950 as the amount they need to generate within a period of four years. This is somehow difficult for this company given that it’s a small company, and is expected to raise substantial funds in a span of four years. Venture financing is a base upon which the company can use to raise funds apart from debt financing. The venture capitalist is a permanent source of financing that facilitates long term projects. It boosts the credibility and credit rating that helps the firm to lower level of leverage and the possibility of a firm going into receivership and liquidation.
Another way of financing a company is through debt financing, it is a fixed return which is fixed on the phase value of debt in the firm. Debt financing is limited in quantity and thus it is ideal for a company that has strong base in equity. This type of debt financing cannot be used without getting the approval of the lending company, and it cannot be used during the time when the economy is in liquidation.
Tremblay Company is on the good side of the economy because its performance is great in regard to the income statement and cash flows. In such a situation, many companies can be willing to lend money to this company.
Essay 2
In today’s economic conditions, every company is at a situation to borrow funds to enable it to finance the activities that it runs; it’s not enough to be financed by the owner’s only. Tremblay is among those companies that depend on borrowing to finance its operation therefore ensuring it does not go into liquidation and receivership. Borrowing is either long term or short term; it is the duty of the management to choose which method to use according to the needs of the company.
Tremblay is in a position that needs some funds in order to avoid falling into bankruptcy, since the current liabilities tend to be more than the current assets. The company has to invest in viable projects in a span of four years to avoid going into bankruptcy. Tremblay can engage into equity financing which is a short term debt having short repayments. Through this, it can meet all its financial requirements appropriately. Tremblay should take the proposal that is provided by RBCC, whereby the firm will not feel indebted and even compromised to the conditions that are given by the loan payment and financing.
Equity financing enables the firm to attain its goals and obligations since the conditions that are attached to it are favorable in regards to loan repayment. Tremblay is also desired by RBCC because in the past years it has been doing well it just that it needs additional funds because of the prevailing conditions it’s going through at the moment.
As this is not a very serious condition Tremblay can also engage overdraft as a means of short term debt financing. Overdraft has many advantages as a means of short term financing it requires less collateral and requirement for lending. Overdraft also is quick to acquire in time when the company is going through a financial crises to firms that are small like Tremblay. Overdraft as a means of debt financing is recommended because it has many advantages as it increases the gearing of the firm at the time of crises
Tremblay should not be left to dive into insolvency because it is facing a short term financial crises. The financial statement that are provided shows that Tremblay is a small company that is doing so well, and can do much better if given an opportunity. The proposal put forward by Leblanc is a sign of faith in this company and it shows that Tremblay can do well once it is offered the opportunity.
Essay 3
In most cases debt financing which is a means of giving funds to the firm comes in many ways such as long term and short term means of financing. It is appropriate for the company to venture into borrowing when the gearing level is low and the market share is not stable. The firm usually has a long term forecast of the prevailing economic conditions and the anticipated future expectations makes borrowing a going concern for the firm. The decisions made should be appropriate and viable decision so that the company can be able to maintain its future cash flows and maximize the shareholders wealth as they have to get their dividends at the end of the year.
Tremblay is at a worrying situation and this calls for immediate funds that will enable the firm to maintain it current assets to make sure they are not less the current liabilities. Tremblay can borrow from commercial banks in the form of term loans. Term loans are very economical in small business as a means of debt financing because they have short and also intermediate maturities that favor these firms. These lengths of payment not only indicate the different times that the firm can have to repay the loan but also the purposes that these loans give to the firm. As a small business Tremblay can use term loan as a means of debt financing to acquire the funds so that it can shield itself from going into liquidation and receivership.
The proposal that Spencer and Leblanc gave to Tremblay was a viable way of raising funds for the firm, the proposal was based on giving common stock in exchange for loan finance. Tremblay was to make sure that they invest in long term projects that would be viable and that would produce desirable returns as long as the firm was able to meet all its financial needs. The firm is also given a condition that it should make decisions that are based on anticipating on future cash flows, that are well projected and the economic conditions justifying the loan are ultimate. The firm is willing to invest in viable and long term investments in order to repay the loan finance in the shortest period.
In conclusion, Tremblay is at a position where it is expected to make a sensible decision in respects to how it will invest the funds offered as loans and in return be able to repay the loan. Tremblay can rise to new levels of success if it has a sound and effective management that is able to make wise decisions. This way, the firm boosts it gearing and this enables it to be accepted by financial institutions that are willing and ready to lend money to small firms.
