Nanda Home is new enterprise; therefore it faces a lot of financial problem when operating company. Financial management is very important to company not only for new enterprise as Nanda Home, but also to every company, because financial management provides an overview of monetary management of company such as cash follow of company, incomes, expense of company. Thus, Nanda Home needs to manage finance well to run company effectively.
This report provides for Nanda Home a basis analyses about finance: sources of finance, the implication of those sources in term of legal, bankruptcy, debt, risk as well as provide recommendation for Nanda Home in each expansion stage. It also explains the importance of financial planning for Nanda Home. Bank can be considered as one of financial organization. Naturally, one of main functions of bank is lending money. However, to access money from bank, you need to satisfy the conditions in order to borrow money from bank.
Before lending money, bank often checks history of borrowers in term of payments, debts in the past to make sure partly the borrowers have enough honesty. They also evaluate borrower’s liquidation; set up interest rate, and they even determine in which case they can call in money earlier. The bank also requires mortgage for security and other formalities. It seems that the formalities in borrowing money from bank are very complicated. Moreover, you have choice to choose any bank with high prestige and the interest rate is low to access money for business.
This is also a way to mobilize capital for business. The company is privatized then goes to the public stock market. There are two kind of share: common share and preference share. Through selling share of business, company can gain more money/ capital for running company. In other words, you can have investment in term of capital from other people, and they also become one of owners of company. This is considered as selling brand to other people. Those people can use Nanda Home brand in their business as well as applying the process that Nanda Home are applying.
In return, Nanda Home will get interest (it can be license fee) or an agreed percentage of profit made by the franchisees. It can be 10% income annually or higher. It depends on the contract between Nanda Home and those companies. Leasing also can be a source of finance of Nanda Home. Nanda Home can lease assets such as the stationary equipment in Nanda Home office to get money. At the end of leasing agreement, Nanda Home, lessor can lease assets to someone else and obtain a good rental for it, or Nanda Home can sell those assets at second value to get money back.
This is a popular way to mobilize capital for cooperation. Issue cooperated bond, and company get money by selling bond. There are two kind of bond: convertible bond, and common bond. Convertible bond after time can convert to shares of company. Legally, Nanda is owner of Nanda Home, and Nanda Home is considered as sole trader. Financially, Nanda Home doesn’t have any creditor, because all capital comes from Nanda.
The advantage is Nanda doesn’t have to pay interest as well as show the business activities to other parties. In other words, Nanda is entitled to operate Nanda Home totally. In addition, Nanda also doesn’t under pressure to pay back the loan. However, usually, owner capital is very limited. It can’t afford to operate business in a long time as well as to expand the business.
