Do a complete and detailed QUALITATIVE analysis of COST associated in both the cases. Which one is more beneficial?

Certain values can be assumed if required.

Financing:

To support the companys possible expansion and further investment in new technology, InnovAppliance will need additional funds. The company currently has a strong financial position, with healthy cash reserves and a positive operating cash flow. Furthermore, InnovAppliance has a good credit history and a favorable relationship with its existing lenders. There are currently two financing opportunities available to the company at this time, with the potential for additional financing at a later date. The CEO would like you to compare the two financing options and provide guidance on which one would be best for the company to pursue.

Option 1: InnovAppliance has approached an Israeli bank to secure a loan for the expansion to Israel, or for use in further technological investment. The bank has offered a term loan of $2 million with an interest rate of 8% per annum. This bank is known for offering strict debt covenants and requires the company to maintain a current ratio of 2.2:1 at each financial reporting date. The loan has a repayment period of five years, and InnovAppliance would need to make equal monthly payments, including principal and interest. The loan requires collateral in the form of the company's manufacturing equipment, with a market value of $1.8 million.

Option 2: InnovAppliance has engaged with venture capitalists interested in investing in the company's expansion. They have proposed an equity financing deal where they will invest $2 million in exchange for a 20% ownership stake in InnovAppliance. The venture capitalists have a track record of supporting successful technology companies and can bring valuable industry expertise and networks to help accelerate InnovAppliance's growth.