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Question
Which source is the best source of raising borrowed funds for a business? and why?
Answer in Brief
Solution
Loans from financial institutions are the best source of raising borrowed funds for the following reasons:
- Financial institutions provide long-term finance, which is not provided by commercial banks.
- Many of these institutions provide funds as well as financial, managerial, and technical advice and consultancy to business firms.
- Borrowing from financial institutions enhances a company's reputation in the capital market. As a result, such a corporation can readily raise financing from many sources.
- Repayment of loans can be made in easy instalments, so it does not prove to be much of a burden on the business.
- The funds are made available even during periods of depression when other sources of finance are not available.
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Sources of Raising Capital
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