The goal of business finance is to raise sufficient capital at the least cost for the level of risk that management is willing to live with. The risk is that a business will not be able to service the debt and be forced into bankruptcy.
Broadly speaking there are 5 main ways of funding a companys needs:
-> Receive credit from suppliers
-> Obtain lease financing
-> Obtain bank loans
-> Issue bonds
-> Issue stock
Supplier credit
This is the easiest way that companies obtain funding. Companies buy goods and services and have anywhere from seven days till 6 months to pay for them; when companies need more credit from suppliers the financial controllers will negotiate longer credit terms or larger credit lines. The payment terms can also be stretched and this can work well because the creditors do not want the customer to go into bankruptcy taking their money with them.
Lease financing
Instead of buying equipment, many companies choose to lease equipment – this is a form of franchising.Cars,computers and heavy equipment can be financed for short periods or indeed longer periods.
If it is a short period...
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