Advantages and Disadvantages of Fresh Ltd strategies to Raise Finance for Expansion

Question

Fresh Ltd (Fresh) needs to raise finance for the expansion of its fresh food business. It is considering two options:

• a public issue of redeemable preference shares; and
• a loan from Strategic Finance Ltd (Strategic).

If it proceeds with option (b), Strategic requires Fresh to provide security for the loan. Fresh owns land, buildings, plant and equipment and trading stock (food for resale).

Required

Answer the following questions:

a) What are the advantages and disadvantages of Fresh proceeding with option (b) rather than option (a)?

b) Should Strategic register its security interest? Which form of security would you recommend and why would you recommend it?

Summary

This question belongs to business and corporate law and discusses about advantages and disadvantages of a company strategies regarding to raise finance for the expansion of its fresh food business.

Total word count: 316