Finance_14.04

Long term funds are provided by ownership equity, long-term credit, or bonds. Short-term funding is mostly provided by banks extending a line of credit. Other ways are:
- Capital increase, which consists on increasing the company’s capital by offering new shares to the shareholders and other potential shareholders. It is an easy way to finance the company because there is no need to pay interests to anybody out of the company. The main disadvantage is found when the shareholder doesn’t trust enough on the company to invest more money there.
- Shares, which are bought by people who find it profitable to have money invested in the company. The main problem with this way of finance is that the owner could lose control of the company, because shareholders become new owners.
- Loans, given by banks. It is not easy to get a loan if your company doesn’t have something to prove its solvency. The company must give the money back at the end of the established period with its interests.
- Official aid given by authorities. It is a way of making sure that the company is going to receive their interests.
- Bonds used by the company in order to find new investors. The have fixed interests. They use to have attractive interests for potential investors, so they are quickly sold.
- The delay of the payment to suppliers allows the company to keep the money for a time paying no-interests.
- Renting is an agreement where a payment is made for the temporary use of a good or property owned by another person or company. It is a way of reducing financial risk due to depreciation and transaction costs.
- Leasing is a process by which a firm can obtain the use of a certain fixed assets for which it must pay a series of contractual, periodic, tax payments. If a company has too many things in leasing or renting, they won’t be able to get a loan because they don’t really own anything to support it.

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