Due to the identified opportunity of profitable investment in new machinery, I wanted to inform you that the implementation of new equipment will increase production, general revenues, profits, and sales. However, there are substantial challenging issues concerning cash flow in the first months after the purchase of machinery. That is why additional sources of finance should be examined and taken into consideration.
There are several possible sources of financing during the early months – the personal savings of the management, loans from the members’ families and relatives, and loans from any reliable commercial bank. The company may regard investments from firms or private individuals and the selling of company shares as well. Private investors and stock trading will provide substantial cash flow for the development of our organization, however, these sources will require the disposal of the ownership part that will allow external individuals to vote on the company’s decisions.
A commercial bank may provide rapid additional financing as well. It is a reliable variant that allows companies to return loans gradually and according to a convenient schedule. However, banks lend large sums of money at interest and on real property (Loxley, 2018). Such conditions significantly increase the risks of foreclose and inventory loss, especially in the case of ineffective business performance. In consideration of the foregoing premises, personal savings and the financial support from close family members and friends are defined as the most reasonable options of additional external finance. This cash flow is free of interest, and it is not faced with time constraints.
I am confident in our company’s working potential and its further success due to the implementation of new machinery. That is why I am asking you to consider the proposed variants of external financing.
Reference List
Atrill, P. and McLaney, E. (2017) Accounting and finance for non-specialists. 10th edn. Harlow: Pearson Education.
Loxley, J. (2018) Debt and disorder: external financing for development. New York, NY: Routledge.