Financial Guide for SMEs - SME Corporation Malaysia

Financial Guide for SMEsTIPGenerally, a business would aim to maximise the use of debt fi nance tofund its operations, as long as the business can service the level of debtand has enough security to support the funding. The business ownerwould retain the benefi ts of ownership in respect of growth andprofi tability of their businessThe choice between debt and equity is, therefore, a combination of:• Assessing the limitations that debt finance may bring;• Determining if your business has the growth potential to be attractive to anequity investor; and•Evaluating your willingness or preparedness for the changes equityinvestment will require.Many SME owners fi nd that the retention of majority control over their businessis important to them, and that their objectives are based on both lifestyle andfamily priorities. In these circumstances, debt will be their primary alternative forfunding their business, as they are unlikely to meet an investor’s objectives.TIPYou may find that your ability to raise debt improves with equityinvestment92chapter 7-13 p79-181 Eng.indd 928/15/11 5:02:56 PM