finance_0912

For a company there are many ways of raising funds.

1.Shares. The owner can issue shares to people who think that his business has potential growth and profitability. With good track record this will be easier than if it is his first time. The price paid will reflect their trust in the business and in the management. The disadvantage is that it dilutes the founder’s percentage and could loss control of the company.

2.Loans. If the business has assets i.e land, buildings, cars, etc. contributed by the owner it might be possible to get a loan from the bank. Banks tend to be conservative about lending to new companies, especially in these circumstances. What you borrow must be paid back with interest which can be set against taxes.

3.Venture capital. VC firms are more prepared to take risks but will ask for a big part of the profits and possibly the company. These firms are bond to take a stockholding in companies able to grow quickly or in companies that are in a difficult situation that can be solved with their financial help and assessment.

4.Bonds. The company can issue fixed interest bonds. Blue chip company bonds are popular but this is not an option for small or start up companies.

5.Leasing and renting. Companies do not need to own their productive assets and in many cases prefer to lease or rent them. This helps to plan budgets and frees up capital which can be used to expand business but can be expensive.

6.Official aid. Aid is often offered by local, regional, national and European bodies.

7.Suppliers’ credit. It is possible to defer payments to many suppliers to, for instance, thirty days. That practice frees up capital for the owner.

8.Profits. As the business makes profits this can be reinvested in the company. There is always a dilemma about how much money to take out and how much to leave in.

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