In the article it is spoken about Ways To Find Financial Support For Steady Business. Business finance aims at raising sufficient capital so that it covers the level of risks faced by the management. Without such a source, organizations have to live with the fear of bankruptcy which can be a disaster for any business organization.
There are basically 6 ways to fund the company for it needs. Apart from this there are avenues of raising capital through personal ventures but these tend to be risky in nature. They are receiving credits from suppliers, getting lease financing, getting bank loans, issuing bonds, issuing stock, and factor business debts.
The first method, which is getting credit from suppliers, is the easiest way for a company to obtain funds to support its needs. The company which buys goods and services from these suppliers has enough time before they can actually pay these suppliers.
A liberal time span can be requested with the help of financial controllers who negotiate for incrementing the credit lines for smooth business. The creditors also support the cause of stretching the credit limit mainly because it is their requirement to keep their customers out of danger from bankruptcy as it may ruin the money invested by these creditors in these organizations.
Lease financing is another effective method where the company decides not to buy the actual item; instead they prefer to lease them. This type of financing is a good way for business continuity. The leasing can be done for equipment like cars, computers, etc., for long terms or short periods. Short term leasing is otherwise called operating lease and after use, the equipment is returned back to the company to which the item originally belonged.
In the case of long term leasing, it is actually a method by which funds are given towards the purchase, instead of buying temporary services. These leases are otherwise called capital leases. In the case of long term leasing, liabilities are recorded on the register books for further reference.
The next is a popular method, bank financing which is the next level of financing. In this case, credits are secured by the financial assets possessed by the firm. The chances of bankruptcy are more in this case. Bond insurance is another method where bonds will have fixed interest rate along with contractual payments and also a principal maturity. If the bonds are not serviced in time, the organization is facing a major risk and in this case there can be a possibility of ousting the owners of the company itself.
The next method is through stock issues. The payment here is non contractual, non tax deductible dividend payments and the ownership of the business is mainly determined by stock which will also determine company assets. Cash is raised by issuing additional shares of the company which is done at the expense of the present shareholder’s interest in ownership. The current shareholders will have to share their ownership with the new shareholders in that case. Such a method can make the new shareholders dilute the interest of the current shareholders which is actually a kind of adjustment for avoiding risks.