Week 9 Health Care Strategy



Week 9 Health Care Strategy

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Week 9 Health Care Strategy

Sources for Capital Financing for Not for Profit and For-Profit Organizations

Not for profit organizations whose main function is to provide a type of services usually, public service requires creative sources to fund their operations. As they are not making any money from providing any service or product they can use avenues such as donations from charitable donors, Crowd Funding using online platforms for kick starter and Indiegogo, Fundraising, Grant writing from companies, involving businesses into their operations as patrons and finally through endowments and trusts (Aschari-Lincoln and Jaguar, 2016). Whereas, for-profit companies are charging something for the products and services they offer. This helps them in maintaining a good profit margin and help keeps the people whose money is invested in the company happy. Just like for Not for Profit companies. For-Profit companies also have numerous avenues that they can use for capital financing. These include Personal investment, Venture capital, Angel investors, Government grants and subsidies, Bank loans and loans from family and friends (Schwienbacher, et al, 2015).

Advantages and Disadvantages of Debt Capital Financing

The primary advantage of using debt as a source of capital financing is that ownership of the company is maintained. Secondly, companies get tax deductions on the interest they pay on the debt. But the disadvantage is that the payback amount on the debt will include interest as well and this also affects the company's credit rating making it riskier. Also, in order to attain debt financing, a company should show that they are liquid enough to pay back the debt (Huang, et al, 2016).

Advantages and Disadvantages of Equity Capital Financing

Compared to Debt financing, Equity financing is less risky because there are no fixed monthly loan payments. Also, it is a great alternative when you are in the midst of credit problems and is a long term based investment. But Equity investors do want their share in the profit of the company. There is also the possibility of losing control of their companies as a share of their company is sold to someone else. This also leads to conflict as the more the investors the more clashing of views will occur (Attig & El Ghoul, 2018).

References

Aschari-Lincoln, J., & Jäger, U. P. (2016). Analysis of determinants of revenue sources for international NGOs: Influence of beneficiaries and organizational characteristics. Nonprofit and Voluntary Sector Quarterly, 45(3), 612-629.

Attig, N., & El Ghoul, S. (2018). Organization Capital and the Cost of Equity Financing in Medium‐Sized Manufacturing Firms. Contemporary Accounting Research, 35(3), 1616-1644.

Huang, R., Ritter, J. R., & Zhang, D. (2016). Private equity firms’ reputational concerns and the costs of debt financing. Journal of Financial and Quantitative Analysis, 51(1), 29-54.

Schwienbacher, A., Baker, T., & Welter, F. (2015). Financing the business. The Routledge companion to entrepreneurship, 193-206.