Soft capital rationing — OpenTuition Forums

SShanna10y ago

Hi, sir I have trouble understanding the example " soft capital ...for example, the amount of funds needed may be small in relation to the costs of raising the finance."

John MoffatTutor10y ago#1

There is not much point in borrowing (say) $1,000 if the charges involved in raising the money are $800 - you would be left with hardly anything. If you were borrowing $10,000 than it might be worth paying charges of $800 :-) However, wherever you read this, it is not a very good explanation of soft capital rationing at all. For a better explanation you need to watch my free lecture on capital rationing.

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