What Are The Ways In Which Enterprises Raise Funds?

Ways of raising funds for enterprises

Equity financing

Equity financing refers to raising funds by issuing shares, which is a very important means of raising funds in the economic operation of enterprises.

The stock as a holder's right of ownership of a company's equity certificate, on the one hand represents the shareholders' right to demand for the enterprise's net assets; on the other hand, ordinary shareholders have the right to exercise their corresponding control and participation in the production, operation and management of enterprises by virtue of their shares and the total amount of shares authorized to exercise power.

1, the advantage of issuing shares.

First, the funds raised without repayment are permanent and can be occupied for a long time. Two, generally speaking, the amount of capital raised in this way is relatively large and the restriction of money use is relatively loose. Three, compared with the issuance of bonds, the financing risk of issuing shares is relatively small, and generally there is no fixed dividend burden. At the same time, this way reduces the company's asset liability ratio, provides protection for creditors, enhances the subsequent debt raising ability of the issuing companies, and four is financing in this way, which is conducive to improving the company's popularity. At the same time, due to the general requirements of non-listed company in terms of management and information disclosure, the general requirements are more standardized, which helps to establish a standardized modern enterprise system.

2, inadequate stock financing.

It is mainly manifested in the following aspects: first, the initial work of issuing shares is relatively complicated, and the issuance cost is relatively high; two, because the investment risk is relatively large, the expected return of the investment is relatively high, and dividends are paid after tax, so there is no tax effect, so the capital cost of stock raising is relatively high; three, stock financing may increase the new shareholders, thereby affecting the controlling rights of the original large shareholders. Four, if the stock is listed, the company must disclose relevant information in accordance with relevant laws and regulations, and may even expose the commercial secrets, resulting in higher information disclosure costs.

Direct investment absorption

Direct investment is a kind of equity financing method that companies absorb other units and individuals in accordance with the principle of "joint investment, sharing risks and sharing profits" in the form of agreements.

The state, legal person and individual, including foreign businessmen, can directly invest in cash assets, physical assets, industrial property rights and land use.

The company law of China stipulates that shareholders must pay valuation, verify property, do not overestimate or underestimate the price, and handle the pfer procedures of their property rights in accordance with the law.

1, absorb the advantages of direct investment: as a way of equity financing, the absorption of direct investment also has the advantages of raising capital in the stock financing without repayment, financing risk and financial risk relatively small, no fixed dividend burden, reducing the company's asset liability ratio, and increasing the ability of subsequent debt raising.

In addition, this way can directly acquire the advanced technology and equipment needed in production and operation, and also help the company to form production capacity as soon as possible.

Because of this, China has maintained a relatively high level of foreign direct investment.

According to the 2003 World Investment Report of the United Nations Conference on Trade and development, China was the largest country in the world to absorb foreign direct investment in 2003, amounting to $53 billion 500 million.

2, the absorption of direct investment is insufficient.

The shortcoming of absorbing direct investment is the high cost of capital, which brings huge returns to the owners. At the same time, because the financing method does not take securities as the medium, the property right relationship is sometimes not clear enough, and it is not convenient for property rights pactions.

It is difficult for investors to enter capital, so it is difficult to absorb large amounts of social capital and the scale of financing is limited.

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Bond financing

A bond is a negotiable securities issued by an economic entity in accordance with legal procedures for the purpose of raising funds and paying interest and paying interest within a specified period.

It belongs to a written voucher indicating the relationship of creditor's rights.

Bonds issued by enterprises are generally referred to as corporate bonds or corporate bonds. They can also be divided into non convertible bonds and convertible bonds.

Non convertible bonds refer to bonds that can not be converted into shares issued by enterprises.

Most bonds belong to this type.

Non convertible bonds, as an important means of financing and financial instruments, have the following characteristics: repayment, liquidity, security and profitability.

Convertible bonds refer to bonds that convertible bondholders can convert into shares of issuing enterprises according to the stipulated price.

But Switching Company bond is a special corporate bond that can be converted into common stock at specific time and according to specific conditions.

Convertible bonds also have the characteristics of bonds and stocks.

For investors, the biggest advantage of convertible bonds is selectivity, that is, they can choose to hold bonds maturity and receive interest income; they can sell bonds in the two tier market and get the spread; they can also be converted into stocks.

If the stock price falls, investors can choose the debt repayment characteristics that can help investors avoid the losses caused by the stock fall. When the stock market goes up, investors can choose to turn shares to get the proceeds of the stock price rise.

For issuers, convertible bonds have lower coupon interest rates and lower financial costs.

1, bond financing advantages

First, the cost of capital is relatively low.

Compared with the stock dividend, the interest of the bond is allowed to be paid before the income tax, and the company can enjoy the interest of the tax, so the cost of the bonds actually borne by the company is generally lower than the cost of the stock.

The two is the availability of financial leverage.

Regardless of the profit of the issuing company, the holder generally only receives a fixed interest. If the company gains a large amount of capital and the additional revenue is greater than the debt interest paid, it will increase shareholder wealth and company value.

The three is to protect corporate control.

Coupons generally do not have the right to participate in the management decisions of the issuing companies, so issuing bonds generally does not decentralization of corporate control.

2, the lack of bond financing. The issuance of corporate bonds is relatively strict with the enterprises themselves, and the procedures for approval and issuance are rather complicated. The funds raised by issuing corporate bonds must be used for purposes approved by the examining and approving organs, and shall not be used to make up for losses and non production expenditures.

A listed company must also have some basic conditions for issuing convertible bonds. For example, the financial statements have no reservations after the CPA audit. In the past three years, the profit is continuous, and the net assets profit rate of the general industry is over 10%, and the companies engaged in energy, raw materials and infrastructure require more than 7%.

The asset liability ratio must be less than 70%; interest rates should not exceed the interest rate of bank deposits in the same period; the amount of issuance should be above 100 million yuan; other provisions of the Commission.

In addition, the issuance of corporate bonds must pay interest on time and form a certain financial pressure on enterprises.

The risk of this financing channel is relatively high.

Financing lease financing

Financial leasing refers to the leasing paction provided by the leaseholder's financing funds for the lessee to provide the necessary equipment, which has dual functions of financing and financing. It mainly involves the lessor, the lessee and the supplier, and has two or more than two contracts.

The lessor shall enter into a purchase contract with the supplier, and conclude a lease contract with the lessee, in accordance with the needs and choices of the lessee, and lease the equipment purchased to the lessee, and the lease term shall not be less than two years.

During the lease term, the lessee shall pay the rent to the lessor in installments according to the contract stipulation, the ownership of the leased equipment belongs to the lessor, and the lessee shall have the right to use the equipment during the lease term.