The Company (IcewebInc) already has a joint project with a telecommunications company in Kenya. The project is about launching cloud computing services in this East African nation. The project was funded jointly by the two companies, with Ice web contributing 40% of the costs while the other company in East Africa known as Safaricom contributing the other 60%. The project took off successfully, but certain unforeseen factors have led to its stalling. This includes insufficient funding to move on cloud computing project. There is a need for both companies to raise the remaining amounts of money needed for its completion. Safaricom has already assured that it has part of its funds for the project. Ice web Inc has also to reach its end of the deal in financing the project.
The IcewebInc Inc wishes to start a subsidiary company in India that will provide software solution to clients in United States, and the world at large. Most of the personnel in this company, including the technical staff will be from the host country (India) with the idea of reducing the cost of labor IcewebInc Inc may incur being paramount. India is strategic not only because of its cheap manpower, but also because of the availability of skilled labor in the information and communication sector. This project also needs a lot of financing, and the Ice web Inc does not want to involve any other telecommunication company. Thus it will have to go it alone. In order to finance these projects, the company has the following possible sources of finance for both projects;
This refers to a scheme through which the company goes for a commercial loan from financial institutions. A number of financial institutions are available for this option but the parties to the transaction need to agree on the associated terms and conditions. (Canada Business Network (CBN), 2013). Another option is equity financing. In this option, the funds that are obtained end up making part of the business ownership. In many cases, there are some specialised organisations that offer this type of financial solution to companies (CBN,2013). Within this type of financing, there are also a number of options that are available to the company. First, there are companies that can provide all the funds needed in exchange for equity, then there are business persons who prefer to fund, and also take part in the running of the business especially if it is a start up. These investors also have a certain period of time within which they can keep their capital in the company. After this period, most of them would prefer to move on to another project. In order to have a good chance of obtaining this type of funding, Iceweb inc would have to look at equity firms that prefer their kind of projects (Second Venture Corporation (SVC), 2001).
Since it is more of a start up for the company, and especially in an overseas market , it would be necessary for it to look for an ‘angel’ more so from the host country. This term does not refer to the heavenly creatures, but rather to individuals who have enormous resource and who are willing to invest in the company. This could also save the company some amount of decision making since many of these financiers prefer to be involved in the process of making project decision. The wealth of experience brought in by these financiers would be of great importance to the success of this subsidiary company to be set up. Many of these financiers have much experience in matters that deal with the running of the business (Muir, 2013)
The cloud computing project that is to be undertaken in East Africa will involve leasing out some of the Iceweb inc equipment and personnel to Safaricom. Due to this, company can acquire funds through debt funding. It will be sensible and businesswise since the income streams from the equipment leased out can be used to offset the interest rates from this debt.
For the second project that will involve substantial investments, the company could consider two options. They can go for a partial debt equity and partial ‘angel’ financing. The debt equity would enable the company to ease some of the financial burden it would have in shouldering its undertaking in the project. The ‘angel’ could be important to the subsidiary in terms of managerial capacity, and also on enabling the company acquire a national image. These are the considerations that have to be made by Iceweb inc in projects that it has to undertake. However, the final decision on the financing rests on the owners of the funds.