Debt Financing

1080 Words5 Pages
The financial plan of any company is important. One of the most important factors or decisions is the plan to use debt financing, equity financing, or a combination of the two. The decision to go with one or the other is large and mostly relies on personal feelings about the topic. Some owners want full control and therefore lean to debt financing and others lean to equity financing with the ability to give up some control of the company. For the hard charging entrepreneur, the most control is best. All successes and failures can be placed on one single focal point and therefore this allows entrepreneurs greater flexibility in their operations. Concrete Fabricators should apply for debt financing of their heavy machinery and start-up costs. Concrete Fabricators is a business hopefully on the move in the formwork concrete construction business. The formwork concrete business is a specialized portion of the construction industry which intuitively works with concrete. Concrete Fabricators specializes in the portland cement concrete, the most commonly known “concrete”, portion of the concrete industry which also includes asphalt (Palo Alto Software 2007). According to the business plan the construction industry was in the beginnings of a large boom. The facts showed this to be true, with the construction market finally collapsing early last year, after about 8 solid years of growth. With this in mind the firm was entering the market at a prime time making the risk factor low with hindsight. Even now the concrete business will always be a needed service, therefore the risk of the business plan might be slightly greater than when originally proposed, but it is still at an acceptable level. An average of 3% growth in the state of Oklahoma shows the potential for a new company without necessarily impeding or infringing on other companies (Palo Alto Software 2007). A few problems are inherent with the business plan as provided which will need to be amended. The first is payroll. The three main cement layers never receive a pay increase. This is completely ill-logical unless they plan to hire three new guys every year. Everyone needs a pay increase. Also the cement layers are the only workers provided in the payroll estimates. The plan is forgetting the two owners as well as the site foreman, unless these three are the primary cement layers, the senior management staff will need a salary of some type (Palo Alto Software 2007).
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