ACCA SBL Syllabus G. Finance In Planning And Decision-Making - Suitability, Feasibility And Acceptability Of Finance - Notes ^{2 / 11}

Sources of finance can be evaluated using the SAF model:

Suitability
Is this type of finance appropriate for its use?
Eg. Long term finance is usually appropriate for long term, non current assets
Acceptability
Will stakeholders be happy with this type of financing?
Eg. Risk-averse shareholders might not like high levels of debt.
Feasibility
Can the additional finance be raised? Will banks lend? Will shareholders invest more?

Method	Advantages	Disadvantages
Operating cashflows	No change in ownership	May not be sufficient - restricts dividends
Equity	Long term	May dilute control
Debt	No dilution of control Good for budgeting	Issue costs; Gearing can increase overall costs
Overdraft	Easy to set up; No effect on gearing	May be called in immediately