Question

Discuss five main advantages of obtaining funds from specialised financial institutions.

Explain the main advantages of obtaining funds from specialised Financial Institutions.

Answer 1

1. Specialised financial institutions provide both loan capital and risk capital. They also offer underwriting services, enabling companies to enjoy the benefits of trading on equity.
2. New businesses, which may struggle to raise funds from the public, can access finance through these institutions. They offer assistance when traditional sources of funds are not available or are too costly. Financing for modernisation and expansion can be arranged without putting pressure on the company’s financial resources.
3. Since these institutions conduct a thorough evaluation before granting assistance, having a relationship with them boosts the creditworthiness of a company.
4. They also offer loans and guarantees in foreign currency and provide deferred payment facilities for the import of machinery and equipment.
5. The interest rates and repayment terms are often affordable and flexible, with options to repay in easy instalments available for eligible businesses.
6. Along with funding, these institutions offer expert advice and guidance to support the effective planning and management of projects.