Financial Guide for SMEs - SME Corporation Malaysia

Financial Guide for SMEsAdvantagesDEBT EQUITY INTERNAL FINANCE• Retain control over thebusiness.• Growth in value of thebusiness is retained bythe owner.• Debt repaymentcommitment can befixed.• Lower cost of capital.• Lower cost of raisingdebt finance.• Interest expense is taxdeductible.• Ability to raise fundsin excess of security.• No exposure tochanges in interestrates.• External resourcescould add strategicinput; and alliances.• Improved profile withlenders.• More stable financialstructure.• Possible mentoringsupport from theinvestor as wellas their funds.• Utilising internalfinance as analternative to debtfinance willpotentially increaseprofitability as thesefunds will not carryservice costs.• No exposure toexternal market,such as interestrates and investorappetite.• Retain control overthe business.• All growth in thebusiness is retainedby owners.• Better cash flowmanagement with nodebt / repaymentcommitment.• No exposure toexternalstakeholders suchas banks orinvestors.• No security overassets.89chapter 7-13 p79-181 Eng.indd 898/15/11 5:02:55 PM