Business financing | What is the financing of a company?

When it comes to creating a company, if there is no firm financing, it can become a practically impossible task.

When it comes to creating a company, if there is no firm financing, it can become a practically impossible task. This situation has become complicated in recent years and now it is even more difficult to obtain the long-awaited loan for a company or a credit for entrepreneurs.

Traditional bank financing has been reduced exponentially since the arrival of the crisis and today having a good and competent business idea is not enough for banks to contribute their capital. The bank provided up to 90% of financing to companies, channeling savers' money to them and managing profitability in the best way.

The gap left by bank credit has been complemented with transparent alternatives that help grant loans to companies that are of great productive importance in society and that make the most of customer savings. For this purpose, there is, for example, Direct Lending, whose literal translation from English means "direct loans" and which is focused on small and medium-sized companies. There are also some grants for SMEs that favor the consolidation of the business fabric.

But not everything is loans, there are also in recent years the use of external investors who are involved in projects to make them grow, with the aim of achieving mutual benefit for both parties. Mutual Guarantee Companies also help companies and improve their financing conditions.

Without a doubt, it is necessary to know all the alternatives that exist for the financing of companies and the creation of new businesses, to know which option is the one that interests us at all times.

What is the financing of a company?

The financing of a company is based on obtaining the money that allows you to pay the necessary investments for its correct operation. Of course, this money is not usually offered for free, so it has a cost for the company at the time of its return. Financing can be short or long term. Short -term financing is that which must be returned in a period of less than one year, while long-term financing is used for larger investments and is returned in longer periods.

In this section you will find all the information on how companies are financed and some tips for obtaining investors to finance your company's investments, something necessary to ensure its economic viability.

Internal financing vs External financing

What is better financing with own resources or financing from others? This is one of the questions that entrepreneurs and businessmen ask themselves the most.

It should be said that there is no exact answer and that everything depends on the situation of the company at all times, the amount of money needed and other variables that you must study to know what decision you must make.

Financing for entrepreneurs

One of the main problems to start a business is to find the necessary money to finance the project that we have in mind. Sometimes, it is very difficult to convince people of the potential of an idea, so it is lost due to not having the resources to develop it.

Fortunately, entrepreneurs already have more options when it comes to getting money to create their businesses. You can now look beyond banks to get financing. Of course, it is necessary to have a complete business plan that shows others the economic viability that the company will have in the future. Here you can find all the information about the different financing models for entrepreneurs that exist.

Before choosing any financing model to start a new business, it is necessary to carry out a study that assesses all the alternatives that we have seen previously, and allows us to choose which is the best option. For this, it is necessary to carry out a financing plan in which all the financial conditions and costs are also detailed, and a plan of how the borrowed money will be repaid. Discover all the information about the financing plan.

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Imran Qureshi

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