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U.S Semiconductor is large specialized semiconductor manufacturer within Santa Clara. The company has sold varieties of products in small sales office within London, which service clients in different countries. Until 1980s, its products were shipped by airfreight from warehouses within Silicon Valley headed to London’s Heathrow thereafter distributed to various customers. However, because of its increase in competition from other films, the company decided to establish its distribution center along with technical support facility within United Kingdom. Location for their site was found, which was approximately 50 miles from Heathrow near the small town of Swindon. As part of preparations, a business plan was established in coming up with construction of special, warehouse to protest chips, climate controlled, the number of trucks to move them around in addition to some storage and inventory equipments.
Various groups within the company got involved whereby each of the group raised different views. According to tax department point of view, all assets were to be housed under a corporate umbrella named U.S. Semiconductor Ltd, which he referred to as a wholly owned subordinate of the existing company that was incorporated within Delaware. Within the same discussions, the entity was to be capitalized through minimal equity investment. The main objective was to effectively manage and safeguard government assets. From his point of view, this was the best way to maintain accurate and timely assets in decision making along with encouraging efficient and economic use of government assets. If the governments approve its assets, then the company would qualify for small business administration loan.
The U.S. Semiconductor finance that was responsible for funding operations at home as well as abroad got involved in pointing that, a part from funding operations from home and abroad, there was a need of been responsible in exchanging risk management. This was to suggest that, the U.S. Semiconductor managers were likely to have many opportunities creating value for their shareholders using financial risk management. Its aim was to help the management not to hedge risks that investors could hedge at the same cost. In addition, it was verifying customer financial information sooner than the store of ships goods.
Thereafter, assistance Treasurer called Marcel Godfrey, worked with a number of commercial banks that were to educate him on financing. After discussing with commercial banks, the company decided to use plain vanilla debt financing instead of legally complex leasing arrangement because, the company can use its finances and that of its investors for all start-ups costs, rather than making large loans payments to banks along with getting underway without the debt. By using plain vanilla debt financing, investors would understand when business falls thus would not require their finances back. On the contrary, by using legally complex leasing arrangement, the company would be responsible in making payments, which pose severe financial problems and downturns.
When all was said and done, the U.S. Semiconductor concluded on two financing methods, which included incorporated and usual financing. These two methods were to provide with micro enterprise development in addition to giving out loans. When the fees required for the business was outlined, the choice of rates differed. Some opted sterling pound while others on dollars. Local management insisted on pound sterling funding because they never wanted to minimize the risks of exchange risk that is commonly contributed by changes in technology. Additionally, the dollar driven choice was because it was outline as cheaper.
According to Director of Foreign Exchange, the company would raise its finances in investments programs. This would be done by borrowing money in sterling pounds whereby if the currency was to increase, will give the company a chance to pay out its debts to banks and other lending organizations. Other suggestions included personal investors that the U.S. Semiconductor opted to get their funding from family members that were willing to finance their venture.
Although their were many options, the New Vice president finance invited some of company bankers along with financial advisory towards international funding as well as management strategy. Their suggestions aligned on what is best required in funding methods. They were taught on how to come up with the best approach based on what was they wanted to achieve along with the amount of money they wanted to raise.
Proposal on how to finance subsidiary in the UK
Based on my opinion, the best method that would be applicable in financing subsidiary in the UK would be bank loans. The company would have requested specific loans for real estate owners in order to get frequent cash flow. Banks have been known to issue secure loans to their lenders in addition to giving them a strong foundation in financial record. Banks plays a major role in providing funds to the company. The services provided by banks would have been vital in finance subsidiary in the UK For instance, in times of floods, which wipe out the assets of the borrower, loan defaults may occur. The company is therefore secure in paying the loan in payments required, instead of paying loans in interest.
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