What are the pros and cons of debt financing?
The pros of debt financing are: • A project that a community does not have the resources to fund completely can go forward; • Funding agencies may view debt financing as an indication of a community’s commitment to a project, resulting in higher scores on grant applications; • Having matching funds can make a community eligible for funding programs that it might not otherwise qualify for. The cons of debt financing are: • Unlike grants, debt financing has to be paid back; • Debt financing is not free and in some cases repayment and interest charges can be quite high; • The process for obtaining debt financing can be complicated and beyond the management capability of many small communities; • Managing and paying back the debt requires a complex management and monitoring system. Are there any restrictions on how a community may borrow or invest its money? There are no legal restrictions spelled out in the statutes on how a community may invest its money. There are of course restrictions
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