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Student's Book Form Five

or equipment. Also, it is a relatively slow time while for irredeemable debentures,
way of financing the business because there repayment of capital to debenture holders
are several requirements and procedures to is made when the business has gone into
be followed in loan application. In addition, liquidation. Medium-sized businesses may
the interest rate charged to borrowers adds borrow money in the form of debentures
cost of the loan at the time of repayment. to raise finance as it is a long-term finance
FOR ONLINE READING ONLY
for business enterprises.
Activity 3.2 Debentures benefit businesses because

debenture holders are not part of business
With the help of ICT and consultations: ownership. The debenture is the unit of loan
(a) Identify different financial but the business assets will not be used as
institutions in Tanzania that the collateral. Financing business enterprise
provide loans to medium-sized through debenture is beneficial since it
businesses. serves as a long-term debt in which the

(b) Visit one of the nearby financial business may use it as the sufficient source
institutions identified in part (a) of finance. Furthermore, debenture is more
and inquire information about the flexible because the business enterprises
conditions for providing loans to offer debentures to different potential
medium-sized businesses. investors who are interested. Despite those
(c) How can you improve the benefits, raising finance from the external
conditions of providing loans in investors through debentures is limited to
part (b)? existing businesses, not start-ups. Also,
like other secured loans, medium-sized
businesses issuing debentures to raise
Debentures finance bear interest that should be paid
A debenture is a type of long-term debt that by the business enterprise at the time of
is not secured by collateral. Debentures repayment.
are secured only by the creditworthiness
and reputation of the issuer who can be Crowd funding
corporations and governments aiming Crowd funding involves raising funds from
to raise capital or funds. Debentures the public where a large number of people
have fixed interest rate that the issuing and organisations contribute small amounts
business will pay in future time during of money to finance entrepreneurial
the repayment of that debt. Payment of activities. It can be conducted through
debenture interest is made regardless social media, physical contacts with friends,
of whether the business makes profit or family members, work acquaintances
not. Debentures may be redeemable, in and customers. This approach of getting
which their repayment is for a specified financial capital requires the business

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