10 ways to finance your company

In today's article we are going to develop 10 ways to finance your company, since there are many and very diverse sources of financing that exist in the market.

Hasn't it ever happened to you that you have had a financing problem and when you want to know what is the best way to finance yourself, you have found hundreds of possibilities? And each one is interesting for some types of companies, but it is possible that not for yours, so in the end you are left wondering, and for my company? That is why we want to let you know all the ways to finance your company so you can decide which one best suits the needs of your business project.

First of all, we will mention the types of financing a company that exist, to then break down each of the sources of financing offered by private entities.

Types of financing

Fundamentally, there are two types of financing for a company depending on the origin of said financing. The two types of financing that a company can have are, on the one hand, internal financing, from the company's own resources, and on the other hand, of external financing whose resources are outside the company.

Each one has its advantages and disadvantages that you can read in the article "financing own resources vs external financing".

Internal Financing

Own financing is made up of those financial resources that companies generate by themselves. There are two types of self-financing, on the one hand we have enrichment self-financing, a consequence of the company's own economic activity, this type of resources are also called "reserves", on the other hand, there is maintenance self-financing, the result of the Productive amortizations and provisions.

Sometimes this type of financing is usually a basic and sufficient source of financing for companies.

External financing

When own funds are not sufficient to finance the activity or business projects, companies usually resort to the search for external sources of resources. These sources of financing can have different origins, they can come from capital issuances, contributed by the partners of the company; or external financing instruments, provided by banks or private financing entities.

This source of financing is sometimes advisable due to to speed and agility with which it acts in the procedures required to obtain the credits, as well as for the lower demands and requirements with respect to traditional bank financing in accordance with the security and guarantee of the credits.

Ways to finance your company

Among the very diverse and disparate types of financing for a company, here we present the ten sources that we found most interesting.

Leasing

consists is a long-term lease with option to buy, in which the company undertakes to pay the established entry fee and a periodic amount before becoming the owner of the product, assuming all the derived expenses that it entails (taxes, breakdowns...).

Renting

It's about a contract to acquire the machinery or vehicle by paying a monthly amount. During said contract, the company that rents the product is responsible for the maintenance costs. Once the contract ends, there are usually different options: From returning the property and ending the contract, to starting a new one or even extending the period.

If you want, you can learn more with our article on the differences between leasing and renting.

debt funds

Consists of the issuance of debt by the company in order for investors to buy it and thus become its creditors. Later, the company must return the money from that loan together with an amount of interest imposed by the investor, who is in charge of analyzing the market situation in terms of interest rates.

Factoring 

It is a financial instrument whose purpose is advance payment of invoices issued by a company to a customer. This charge is assumed by the financial entity, which will be responsible for both the monetary advance and the collection by the client in a set time.

Confirming

It is a financial procedure by which a financial entity assumes the management of payments by a company to its suppliers in the event that it cannot make such payments within the terms established by the issuance of the invoice. In this way, the payment of the issued invoices is guaranteed, guaranteeing confidence in the relationship between the company and its suppliers.

Crowdlending

This tool allows companies or individuals to obtain financing for their project through the collaboration of a group of people who invest a monetary amount. In return, investors receive a consideration according to the interest rate charged by the company. The Crowdlending platform will in turn receive a small commission for participating as an intermediary.

Crowdfunding

This tool allows the financing of projects based on the collaborative economy. The collaborators do not receive monetary compensation for their contribution, but rewards or privileges once the project is developed.

Stock financing

This medium is used by companies that have products in the form of inventory in order to mobilize and obtain liquidity from the effort of these products. The company obtains a loan for the value of the inventory that it wishes to mobilize and once these products are sold, it must take charge of the payment of the corresponding part of the loan.

export financing

This financial tool allows the company acquire in advance the liquidity generated by invoices not yet paid of its exported products or to cover the previous expenses of production of said products. The financial entity is in charge of collecting these invoices by the debtor company.

Public entities, aid or subsidies

This type of aid is granted by public institutions. They are presented in the form of subsidies and are processed directly from the public body that offers such aid. They are mainly intended for those small and medium-sized companies that wish to create value, grow and create employment.

We hope that with this article you are clearer about the different types of financing for your company, because we do not want anything to prevent the realization of your ideas and projects!