We explain what financing or financing is, what types exist and what their sources are. In addition, the financing of a company.
What is financing?
Financing or financing is the process of making viable and maintaining a draft, business or entrepreneurship specific, by allocating resources capitals (money or credit) for the same. Put more easily, financing is allocating capital resources to a specific initiative.
Financing is a key element in the success of any project or business, since it involves the resources that will be needed to start it up. Every project requires, in one way or another, a certain margin of financing.
For example, in the case of initiatives that can later generate their own financing, this is the initial push that will start the productive wheel. In other cases, it is the support of an initiative that, otherwise, could not reach its goals. objectives, how can it be a scientific investigation, for example.
Generally, matters related to financing are of interest to the finance and management departments. accounting of the companies, or of the administration of projects of another nature. Depending on how it is financed, an enterprise will have greater or lesser freedoms, and greater or lesser weather to reach the goals initially proposed.
Types of financing
There are many types of financing, and many ways to access them. In principle, we will distinguish between two forms of financing according to who provides the requested money:
- Own or internal financing. That which comes from the same participants in the project or company, that is, from within the organization: from its investors, owners or shareholders, or from the fruit of its own Profits or lucrative activities.
- Third party or external financing. The one that comes from foreign entities to the project or the company, that is, that is assigned by other companies, individuals or institutions and that often requires a certain type of validation, consideration or indebtedness.
Another possible way to classify financing is according to its duration, as follows:
- Short-term financing. When it is the result of arrangements that expect to receive results (dividends, findings or the return of money) in short terms (less than a year).
- Long-term financing. When it is the result of arrangements that do not expect short-term results, but rather in longer periods (greater than one year), or there is even no obligation to return, but they are disinterested contributions to sustain the initiative over time.
Financing sources
Banks and other financial entities offer loans as a source of financing.
Next, we will detail the main ways to obtain financing that exist, especially those that depend on third parties (external financing):
- Credits They are forms of indebtedness, payable in different periods of time and with different margins of interest. They are usually issued by a financial organization (banks, moneylenders, etc.), although they can also be granted by public institutions, usually on more benevolent terms. Mortgages, bonds, the promissory notes and the credit lines they are an example of it.
- Incorporation of investors. Many initiatives can find financing by opening their team to the entry of new elements, whether they are new shareholders (that is, selling Actions company) or new sponsors (to whom to offer in exchange advertising or recognition for the work of corporate social responsibility).
- Informal loans. Similar in nature to loans, but granted in less formal terms, they can come from a friend, relative, lender, or something similar.
- Liquidation of goods or services. In the event that the company or the entrepreneurship have goods to sell or services to provide, you can try to finance yourself by offer of the same, as long as this does not prevent it from continuing its existence, or denatures the project itself. The sale of advertising space, for example, can be a way to self-finance a project that has massive exposure.
Financing a company
Commercial companies are initiatives that usually require constant investments and one management smart about your funding sources.
Large companies have shareholders, for example, who are partial investors who receive a periodic allocation of money from the dividends generated by the company, depending on how many shares they own. Thus, large investors or majority shareholders receive more than the owners of a few shares.
The shares are participation quotas, that is, a form of ongoing debt, which gives shareholders a greater or lesser right to voice and vote in the management of the company.
Instead of shareholders, other companies operate based on their own capital, that is, the sole owner of the same. They can choose to refinance, in case their lucrative activities do not cover their expenses operational, through credits or loans.
However, if necessary, these companies can also decide to open up to third-party investment: that other individuals or other companies buy shares within it, thus giving up part of their autonomy to the new capitalist partners.