-
We need your support!
We are currently struggling to cover the operational costs of Xtremepapers, as a result we might have to shut this website down. Please donate if we have helped you and help make a difference in other students' lives!
Click here to Donate Now (View Announcement)
Commerce - Business finance
- Thread starter Humaiz
- Start date
- Messages
- 726
- Reaction score
- 52
- Points
- 0
There are so many things here. It would be more feasible if you make it more specific.
- Messages
- 726
- Reaction score
- 52
- Points
- 0
Business Angels - Give you the financial help you need when you need it, and invest their own money in your business. If it works within an angel network the angels will pool together with their investment as well as sharing research they each do. Angels understand the needs of a new business as they have been there themselves and therefore they not only offer financial help but they can offer good advice when no one else will.
Venture Capitalists - Give you the financial help you require when you need it but uses pooled money them and others have in a professionally managed fund. Venture Capitalists like to take an active role in the business they are investing usually being a director or on the management board of the business.
You get cash quickly, and don't have to collect the debt. However, you lose some of the value of the invoice.
The factoring company gets the debt and has to collect it. They make a profit by paying you less cash than the face value of the invoice.
You can use factoring to:
Get money quickly
Avoid the hassle of collecting bad debt
Smooth your cash flow
Borrow money, secured by your debt.
External Sources:
Shares: Limited companies could look to sell additional shares, to new or existing shareholders, in exchange for a return on their investment.
Loans: There are debenture loans, with fixed or variable interest, which are usually secured against the asset being invested in, so the loan company will have a legal shared interest in the investment. This means that the company would not be able to sell the asset without the lender’s prior agreement. In addition the lender will take priority over the owners and shareholders if the business should fail and the cost will have to be repaid even if a loss is made.
There are other types of loan for fixed amounts with fixed repayment schedules. These may be considered a little more flexible than debenture loans.
Overdraft: A bank overdraft may be a good source of short-term finance to help a business flatten seasonal dips in cash-flow, which would not justify or need a long-term solution. The advantage here is that interest is calculated daily and an overdraft is therefore cheaper than a loan.
Hire purchase: Hire purchase arrangements enable a firm to acquire an asset quickly without paying the full-price for it. The company will have exclusive use of the item for a set period of time and then have the option to either return it or buy it at a reduced price. This is often used to fund purchases of vehicles, machinery and printers.
Credit from suppliers: Many invoices have payment terms of 30 days or longer. A company can take the maximum amount of time to pay and use the money in the interim period to finance other things. This method should be treated with caution to ensure that the invoice is still paid on time or else the firm might risk upsetting the supplier and jeopardise the future working relationship and terms of business. It should also be remembered that it’s not ‘found’ money but rather a careful balancing act of cash-flow.
Grants: Grants are often available from councils and other Government bodies for specific issues. For example there may be a council priority to regenerate a particular area of a town and who are happy to help fund refurbishment of buildings. Alternatively there may be an organisation that specialises in helping young entrepreneurs to launch new businesses.
Venture Capitalists - Give you the financial help you require when you need it but uses pooled money them and others have in a professionally managed fund. Venture Capitalists like to take an active role in the business they are investing usually being a director or on the management board of the business.
You get cash quickly, and don't have to collect the debt. However, you lose some of the value of the invoice.
The factoring company gets the debt and has to collect it. They make a profit by paying you less cash than the face value of the invoice.
You can use factoring to:
Get money quickly
Avoid the hassle of collecting bad debt
Smooth your cash flow
Borrow money, secured by your debt.
External Sources:
Shares: Limited companies could look to sell additional shares, to new or existing shareholders, in exchange for a return on their investment.
Loans: There are debenture loans, with fixed or variable interest, which are usually secured against the asset being invested in, so the loan company will have a legal shared interest in the investment. This means that the company would not be able to sell the asset without the lender’s prior agreement. In addition the lender will take priority over the owners and shareholders if the business should fail and the cost will have to be repaid even if a loss is made.
There are other types of loan for fixed amounts with fixed repayment schedules. These may be considered a little more flexible than debenture loans.
Overdraft: A bank overdraft may be a good source of short-term finance to help a business flatten seasonal dips in cash-flow, which would not justify or need a long-term solution. The advantage here is that interest is calculated daily and an overdraft is therefore cheaper than a loan.
Hire purchase: Hire purchase arrangements enable a firm to acquire an asset quickly without paying the full-price for it. The company will have exclusive use of the item for a set period of time and then have the option to either return it or buy it at a reduced price. This is often used to fund purchases of vehicles, machinery and printers.
Credit from suppliers: Many invoices have payment terms of 30 days or longer. A company can take the maximum amount of time to pay and use the money in the interim period to finance other things. This method should be treated with caution to ensure that the invoice is still paid on time or else the firm might risk upsetting the supplier and jeopardise the future working relationship and terms of business. It should also be remembered that it’s not ‘found’ money but rather a careful balancing act of cash-flow.
Grants: Grants are often available from councils and other Government bodies for specific issues. For example there may be a council priority to regenerate a particular area of a town and who are happy to help fund refurbishment of buildings. Alternatively there may be an organisation that specialises in helping young entrepreneurs to launch new businesses.
- Messages
- 1
- Reaction score
- 0
- Points
- 0
here are 6 main types of business finance
Supplier credit
This is the easiest way that companies obtain funding. Companies buy goods and services and have anywhere from seven days till 6 months to pay for them; when companies need more credit from suppliers the financial controllers will negotiate longer credit terms or larger credit lines. The payment terms can also be stretched and this can work well because the creditors do not want the customer to go into bankruptcy taking their money with them.
Lease financing
Instead of buying equipment, many companies choose to lease equipment - this is a form of financing. Cars,computers and heavy equipment can be financed for short periods or indeed longer periods.
If it is a short period it is referred to as an operating lease and at the end of the lease the property is still useful and is returned to the finance company.
Long term leases are, in substance, ways are ways of funding a purchase rather than buying the temporary services of a piece of equipment. These are often referred to as capital leases.
For capital leases the leased assets and the financing liability are recorded on the leasing company's books as though the company had bought the equipment outright.
Bank financing
The next level of financing involves banks. If a company has a credit line or revolver with a bank it draws down and pays back up to set limits of credit as cash is needed and generated by the business. The credit is often secured by assets of the firm however if a business runs into trouble it may not be able to pay the bank and go into bankruptcy
Bond Insurance
Bonds have fixed interest rate contractual payments and a principal maturity. The risk comes to the firm's owners if they cannot be serviced. The principle bond owners can then exchange them for ownership of the company and oust the owners.
The After-Tax cost of Borrowing
Interest payments for borrowing from vendors, bankers or bondholders are tax-deductible, while dividends to shareholders are not. The after-tax cost of borrowing is the interest cost less the tax benefit.
Stock Issues
Stock issues have non-contractual, non tax deductible dividend payments. Stock represents an ownership in the business and in all of its assets. If additional shares of stock are issued to raise cash, this is done at the at the expense of the current shareholders' ownership interest. New shareholders share their ownership interest equally on a per-share basis with the current shareholders - this is why analysts say that the new shareholders dilute the interest of existing shareholders.
Factoring Business Debts
Factoring companies generally pay up to eighty percent of the value of outstanding invoices straight away provided that they are satisfied that the business debtor is capable of paying the sums due.
Supplier credit
This is the easiest way that companies obtain funding. Companies buy goods and services and have anywhere from seven days till 6 months to pay for them; when companies need more credit from suppliers the financial controllers will negotiate longer credit terms or larger credit lines. The payment terms can also be stretched and this can work well because the creditors do not want the customer to go into bankruptcy taking their money with them.
Lease financing
Instead of buying equipment, many companies choose to lease equipment - this is a form of financing. Cars,computers and heavy equipment can be financed for short periods or indeed longer periods.
If it is a short period it is referred to as an operating lease and at the end of the lease the property is still useful and is returned to the finance company.
Long term leases are, in substance, ways are ways of funding a purchase rather than buying the temporary services of a piece of equipment. These are often referred to as capital leases.
For capital leases the leased assets and the financing liability are recorded on the leasing company's books as though the company had bought the equipment outright.
Bank financing
The next level of financing involves banks. If a company has a credit line or revolver with a bank it draws down and pays back up to set limits of credit as cash is needed and generated by the business. The credit is often secured by assets of the firm however if a business runs into trouble it may not be able to pay the bank and go into bankruptcy
Bond Insurance
Bonds have fixed interest rate contractual payments and a principal maturity. The risk comes to the firm's owners if they cannot be serviced. The principle bond owners can then exchange them for ownership of the company and oust the owners.
The After-Tax cost of Borrowing
Interest payments for borrowing from vendors, bankers or bondholders are tax-deductible, while dividends to shareholders are not. The after-tax cost of borrowing is the interest cost less the tax benefit.
Stock Issues
Stock issues have non-contractual, non tax deductible dividend payments. Stock represents an ownership in the business and in all of its assets. If additional shares of stock are issued to raise cash, this is done at the at the expense of the current shareholders' ownership interest. New shareholders share their ownership interest equally on a per-share basis with the current shareholders - this is why analysts say that the new shareholders dilute the interest of existing shareholders.
Factoring Business Debts
Factoring companies generally pay up to eighty percent of the value of outstanding invoices straight away provided that they are satisfied that the business debtor is capable of paying the sums due.