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Page 4 of 4 Finance
Stock
Stock issues are limited to 20% of the company’s outstanding shares. You pay a 5% brokerage fee to issue stock. You can issue dividends which tend to (but do not always) improve stock price.
Current Debt
These are one year bank notes. Banks are willing to lend amounts up to 75% of the company’s account receivable, plus 50% of its inventory. There is no brokerage fee for current debt. If your company runs out of cash, you will receive an Emergency Loan, which carries a 7.5% penalty above the current debt interest rate. Emergency Loans convert to current debt in the following year
Bonds
These 10 year notes carry an interest rate 1.4 percent higher than the current debt rate in the year they were issued. Bondholders are willing to lend amounts up to 80% of the depreciated value of the company’s plant and equipment, that is, the assembly lines. You pay a 5% brokerage fee to issue bonds. Companies with better bond ratings have lower interest rates.
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