# Control as a Capital Structure Consideration
Along with cost and risk, control is a critical factor in designing capital structure.
## How Different Sources Affect Control
| Source of Capital | Effect on Control |
|---|---|
| Fresh equity issue | Dilutes the controlling interest of existing owners |
| Preference shares | May acquire voting rights if dividends remain unpaid for consecutive years |
| Loans from Financial Institutions (FIs) | FIs typically stipulate one or more nominee directors on the Board |
| Debentures / public debt | Restrictive covenants may limit managerial freedom |
## Key Takeaway
When management agrees to raise loans from financial institutions, it implicitly agrees to forego a part of its control over the company. Hence, capital structure decisions must balance cost, risk, AND control.