Faced with the diversity of existing financing solutions on the market, the optimal choice has always remained one of the major concerns of entrepreneurs and business leaders who wish to finance a project. To make a successful choice, it is essential to clearly define your needs in order to opt for an appropriate means of financing.
Throughout the life of the company, its activity needs to be financed.
Whether it is to collect financial resources for the creation of a company, to provide additional funds to support its growth, to strengthen its cash flow in difficult times, or simply to meet the classic deadlines required by the operation of his activity.
Financing needs: making the right choices
The tools are not the same according to the needs. An investment requires a stable resource as a mode of financing such as a long-term loan or the use of another device such as leasing. A temporary cash flow difficulty accommodates the discount.
For structures that have a financial director, the choice of tool is his responsibility. The latter takes into account the lifetime of the need to be financed and the cost of resources. In other cases, the entrepreneur decides in consultation with his accountant on the best choices according to the need to be financed.
Some operations go beyond the scope of the financial function by requiring real strategic choices. This is the case of the IPO to raise capital.
Finally, as part of a business plan, it is also essential to provide the financial resources consistent with the project, for example by finding business angels ready to invest in your business or by using crowdfunding.
Financing the "corporate finance" investment cycle
External funding
Conventional financing (bank and credit institution):
it is a long-term loan contracted with a financial organization which makes it possible to finance all types of investment (e.g.: production tool), the borrower therefore undertakes to pay interest (cost of money) and to repay the borrowed capital according to a well-defined deadline. Access to this type of financing often remains difficult for the business creator.
Financing by leasing (Leasing):
it is an alternative financing solution contracted with a leasing company or a financial organization (owner of the property) which allows a company to rent a property (movable or real estate) for a fixed period. In return for the rental fees paid (often more expensive than a traditional loan), the company has the right to exploit all the economic advantages of the property, and if it wishes, it can take it back at the end of the term. contract and in this case the payment of a residual value is required.
Participatory financing or Crowdfunding:
crowdfunding is a new form of financing that allows a company to finance its project from the crowd (individuals, business angels, etc.), through crowdfunding platforms. This method includes three types of financing, Crowdlending (loan paid by interest), Crowd equity (financing against equity participation), Crowd charity (donations without consideration or donations with consideration).
Funding through investment grants:
it is a financing resource granted by local authorities (State) to a company to finance a long-term investment. This is therefore not reimbursed if the company meets all the conditions attached to its granting.
Internal funding
Self-financing
the latter represents the company's ability to finance its operating and investment cycle by its own means, it is a resource that comes from the company's activity.
The capital increases
these are long-term resources provided by the partners or shareholders to enable a company to strengthen its capital, their contributions are represented by title deeds (shares or shares), which give the right to receive dividends (a part profit made) and voting rights (participation in the decision).
Partners' current accounts:
these temporary resources are made available to the company by its own partners in the form of a loan, the latter are considered as creditors of the company, they are therefore entitled to remuneration for their loan (in the form of interest) little matters the result achieved by the company unlike the dividend.
Treasury financing:
Bank overdraft and cash facility:
these are very short-term resources, made available to a company by its bank, which authorizes it to have a debit account for a specific period, the overdraft facility is often used to deal with cash flow mismatches less than a month. The overdraft can last longer. In both cases, a written contract describes their specificities (amount authorized as well as the general conditions of use, etc.).
