Business Financing: Debt, Equity, and Public Funding Options

National Commission of Securities Market Website Analysis

On the website of the National Commission of Securities Market, in the short term, the company mainly used debts to credit institutions, and thus lowered its derivatives, leasing, and creditors for bonds and short-term loan obligations.

In the case of long-term debt, it is used primarily for the issuance of bonds, like borrowing to bonds/t with a nominal value of 700,000 in May 2007, of which 100,000 in nominal repurchase in 2008, obtaining a great benefit in repurchase of 36,327.

Another means of financing long-term loans has been to credit valued at 264,561 at the end of 2008. In the long term, another source of funding such as financial derivatives and leasing is also used.

Business Financing Options

When considering a business idea, we must distinguish between debt financing, which promises to return the borrowed amount plus stipulated interest, and equity financing, which receives contributions of funds, giving up a portion of shares in the company, with the possible loss of control that may result.

At least we ought not to forget about aid.

Debt Financing

• Commercial Banks: They have developed a good number of financial products aimed at financing investment projects of SMEs, including credits, loans, lines of codes, and discount shopping. For higher volume of business projects, commercial banks have another set of resources: notes, bonds, trips to the bag, investment partners, etc.
• Public Banks: The Administration, through the Official Credit Institute (ICO), the European Investment Bank (EIB), and public banks (Argentina), has launched a series of auxiliary financial measures for SMEs, consisting mainly in the implementation of preferential loan lines.
• Financial Institutions: They typically operate as credit institutions, although they are used to finance consumption. Despite their kind usually being higher than banks, they offer the advantage of negotiating each course individually and have minor requirements, guarantees, and lease time.
• Leasing: A leasing contract is a financial lease of an asset, allowing furniture or building through its rental with a purchase option at the end of the fixed period. It is very attractive for its favorable tax treatment but has a higher financial cost.
• Mutual Guarantee Societies
• Factoring: A system widely used in Spain and generally restricted to large companies. It consists essentially in the transfer or sale to a lender or factor (usually a financial institution) of the outstanding accounts receivable by the company.
• Confirming: A service that consists of managing a company's customer payments to their suppliers, offering them the possibility of charging their bills before the due date.
• Forfaiting: Involves the purchase of accepted bills of exchange, documentary credits, or any promise of payment, instrumented in currency against the one which opened a letter of credit. Unlike confirming, it is used in the medium term.
• Issuance of Debt Securities: This is done by using bonds, obligations, and promissory notes. SMEs can use it, but its cost is a major impediment.

Equity Financing

This is capital that is permanently invested in the company.

• Investors or Partners: Our members receive remuneration in our society that can consist of income for benefit sharing, or the sale value materialized through their actions or shares to other partners. Investors or partners are the most active source of funding to launch a company.
• Venture Capital: This is a temporary investment in the capital of SMEs in order to guarantee the succession of the business.
• Stock Market: Usually adopted by large companies.

Public Funding

The funding of public bodies is diverse, although we do not always prove entirely favorable:

• Direct aid for the recruitment of workers
• Rewards quotas for Social Security
• Tax incentives
• Financial aid
• Business advice
• Investment aid
• Aid for innovation
• Aid for improving competitiveness
• Aid for research and development (R&D)