Sources of Financing for a Company
One of the functions of finance in a company, is to seek funding.
This search for funding is given basically for two reasons:
* When the company is lack of necessary liquidity to meet daily operations, for example, when you need to pay the debts or obligations, buy supplies, maintain inventory, pay salaries, rent the premises, etc..
* When the company wants to grow or expand, and does not have sufficient equity capital to meet the investment, for example, when you want to buy new equipment, when you want to have more teams, get more goods or raw material for increase the volume of production, enter new markets, develop or launch a new product, expand the local, open new branches, etc..
Let’s look at what are the main sources of funding for what we can in search of money or funding that we may need to continue operating as a company, or to invest and make it grow:
Family or friends
The simplest way to obtain financing is borrowing money from friends or relatives. This source is typically used only when the money needed is small.
Banks
The most common way to obtain financing is requesting a loan at a bank. To grant a loan to a company, it is usual that banks ask for a minimum of six months experience in the market.
If the amount is high, it is usual to ask for guarantees, either property or business assets or personal property.
Non-bank financial institutions
Some of them specialized in small and medium business, so that the requirements are generally lower than asking a bank, but the loan amount granted is generally lower, usually granted for a shorter time, and usually has a higher cost or interest rate.
Leasing Companies
Banks or financial institutions that provide leasing the product, which is a contract whereby we ask the bank or financial institution to acquire ownership of an asset (eg machinery or equipment), so that later leased it to us and, after completion of a deadline, we buy it.
Factoring Companies
Banks or financial institutions to lend the proceeds of factoring, which is a contract by which you give in to a bank or financial institution the rights of our accounts receivable in exchange for the pay us in advance (after deduction of interest or fees the bank may charge us).
Consumer Finance
For example, those that provide credit cards. This source of funding is not tied to a business or company, but a source from which we raise money for our company.
Related Searches
By obtaining a business loan, for example, we can get a supplier to provide us with goods, raw materials or any assets, and allow us to pay in monthly installments instead of having to make a single payment in cash.
Issue of shares
A funding source is the sale of shares, which consist of securities that give the possessor the right to participate in the distribution of company profits and the distribution of social capital if it is liquidated.
Bond
Another source of funding is the issue of bonds, which are debt securities that the firm issues, and undertake to pay interest periodically and repay the debt value at maturity for a specified period, whom the purchase.
Exchanges or barter with other businesses
Exchanging a product or service for another, for example, paid listings or advertising our products, or offer our services to employees of a company, in exchange for inputs or provide us goods.
Find a partner
Find a person who wants to invest in our company and, in turn, work with us in its growth.
Find an investor
We might look, for example, “venture capital organizations” or “angel investors” (which unlike venture capital institutions, use its own funds and not others), or just any person, company or organization wishing to invest our company money in exchange for a percentage of profits.
Possibility Related Posts:
Tags: Business Finances, Business Tips, Financial Tips, financing for a company, functions of finance in a company, main sources of funding
,