Debt Financing
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Debt financing involves borrowing money that must be paid back over time. There are several sources of debt financing for both working capital in the short-term and long-term needs. Sources of short-term working capital include trade credit, bank loans, commercial paper, and factoring. Sources of long-term financing include debentures, term loans, and securitization, with debentures being long-term securities that pay a fixed interest rate. Proper debt financing allows companies to augment resources and meet both short and long-term capital requirements.
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Banking financial service management
This document provides an overview of bank investment and lending functions. It discusses how banks apply their funds through statutory liquidity ratio investments, non-SLR investments, and lending. Lending includes various types of loans like cash credit, overdrafts, and bill discounting. It also discusses non-fund based lending through bank guarantees and letters of credit. Asset-based lending is described as using collateral like projects, receivables, or securities to secure loans.
FINANCE IN BANKING
In this ppt. I mentioned what are the sources of finance in working capital of an organisation or a business.
Principles of lending and Types of Financing
This document discusses principles of lending in banking. It provides details about group members working on the project, principles of lending including safety, liquidity, security and remuneration. It describes factors considered for lending including character, capacity, capital, conditions and cash flow. It also discusses types of fund based and non-fund based finances and their features. Key characteristics of individual and corporate borrowers are outlined.
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This document discusses various types and sources of working capital finance. It describes trade credit, cash credit/bank overdrafts, working capital loans, bill discounting, bank guarantees, letters of credit, and factoring as common types of working capital financing. Sources are categorized as spontaneous, short-term, or long-term, with spontaneous sources including trade credit, short-term including bank loans, and long-term including retained profits and share capital. The document provides details on each type and source.
Short Term Financing
Short-term financing refers to loans of up to 12 months that are used to finance short-term assets and cash flow needs. Common types of short-term financing include overdrafts, trade credit, loans, and credit cards. Firms need short-term financing to finance inventory or meet growth needs when cash flow is insufficient. Spontaneous financing like accounts payable and accrued expenses also provide financing that fluctuates with sales volume without requiring additional credit. Trade credit is a major type of spontaneous financing where suppliers provide credit for 28 days.
Short term finance
Short term finance refers to additional money a business requires for periods under one year. Common sources of short term finance include bank overdrafts, which allow businesses to draw more money than in their accounts up to a limit; trade credit, where suppliers allow purchases to be paid for over time; factoring, where accounts receivable are sold to firms who pay upfront and collect payments; credit cards for employees' business expenses; leasing equipment instead of purchasing; and bank loans repaid in installments over short terms.
Sources and Uses of Funds
This document discusses sources and uses of short-term, intermediate, and long-term funds for firms. It defines short-term funds as those that mature within one year or less. The main suppliers of short-term funds are trade creditors, commercial banks, finance companies, factors, company accruals, and commercial papers. Short-term funds are used to support seasonal demand increases, finance accounts receivable and inventories, and meet short-term liabilities. Intermediate funds mature between 1-10 years while long-term funds mature after 10 years.
Impact of awareness on the choice of Short term Financing
This document discusses various types of short-term financing options for businesses, including cash credits, trade credits, overdrafts, letters of credit, bills of exchange, and short-term loans. Short-term financing provides quick liquidity and funds to fulfill working capital needs and bridge financial gaps. Some short-term financing options like cash credits and overdrafts provide revolving lines of credit, while others like bills of exchange and short-term loans are one-time loans that must be repaid within one year.
Money market Instruments
This document provides information about money market instruments presented by Bhushan Vijay Phirke. It defines the money market as a market for trading short-term debt instruments with maturities of one year or less between participants that need to borrow or lend cash for short periods. Common money market instruments discussed include treasury bills, commercial paper, certificates of deposit, and banker's acceptances. Treasury bills are short-term government debt, commercial paper is issued by corporations for financing, certificates of deposit are bank-issued promissory notes, and banker's acceptances involve bills of exchange guaranteed by banks. The presentation concludes that individual investors can access money market instruments through money market funds or bank accounts rather than directly.
Credit mgt presentation2
The document discusses various types of commercial financing facilities including:
1. Temporary bridge financing which provides short-term funds until a subsequent longer-term loan.
2. Running finance/overdraft facilities which allow customers to temporarily overdraw their account up to an approved limit.
3. Demand/line of credit loans which are payable on demand or within 90 days and are used to finance inventory and receivables.
4. Term loans which are used for specific purposes like acquiring machinery and have maturities of 5+ years.
5. Discounting of bills of exchange which allows banks to earn interest by advancing funds to customers against bills that are then paid back on the maturity date.
Working Capital Financing - PPT.pptx
This document discusses various options for working capital financing. It defines working capital as reflecting a company's liquidity and being used to meet day-to-day expenses. Common sources of working capital financing discussed are bank loans, trade receivables financing, non-bank financial institutions, informal lending, trade credit, commercial paper, and bank credit facilities. Each option is described in terms of eligibility, interest rates, documentation requirements, and other key factors.
Different Types of Loans Offered by Commercial Banks
The Different Types of Loans offered by Commercial Banks and Explain how Trade Credit & Equipment Loans can Provide Initial Capital Funding. Banks in Zimbabwe
loans and advances.pptx
The document discusses various types of loans provided by banks. It explains that loans are a type of debt where the borrower receives an amount of money called the principal from the lender and is obligated to repay it along with interest. It describes different types of loans like demand loans which are repayable on demand, term loans for medium to long term periods, secured loans against collateral and unsecured loans based on personal guarantee. The steps involved in obtaining a loan from a bank are also summarized.
Guarantees and co acceptance
This document discusses bank guarantees and co-acceptance of bills. It provides details on what a bank guarantee is, the parties involved, types of guarantees, how guarantees are used in export business and safeguards for issuing guarantees. It also discusses guidelines for guarantee business, precautions for issuing guarantees, and how banks can provide co-acceptance of bills as a facility for their customers.
Loans and mortgages
This document discusses different types of loans and mortgages from the perspective of customers and banks. It defines loans and differentiates between secured and unsecured loans. It explains how interest rates affect monthly payments and payoff periods. It discusses reasons why companies may need loans and describes the amortization of loans. It also outlines the process of opening bank credit, factors that influence credit approval, and types of credit commitments banks provide including guarantees. The document further explains mortgage contracts, different types of leasing agreements including operating and financial leases, and real estate lease-back arrangements.
What all financing options are available for SMEs .pptx
The financing options available to SMEs vary from industry to industry. Financing options will also change as the business owner's needs change over time. From start up through growth and expansion, SMEs have many different ways to secure funding for their businesses.
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1) Trade credits and short term loans are the most suitable types of short term financing for small and medium enterprises (SMEs) as they help satisfy SMEs' short term monetary needs efficiently.
2) Trade credits do not require interest payments but the creditor's belief in the debtor's ability to repay is important. Creditors may also offer cash discounts.
3) Short term loans can be secured or unsecured depending on assets, with more security allowing higher chances of financing. Banks also track loan utilization.
Short term finance
The document discusses various short-term sources of finance for meeting working capital requirements for a period of up to one year. These include public deposits, bank credit, trade credit, discounting of bills of exchange, loans from directors, advances from customers, money lenders, and government assistance. It provides details on each of these sources such as what they are, how they work, their advantages and disadvantages.
Innovative trade finance 1
The prevailing rules and regulations in Bangladesh do not permit standby L/C, open account transactions and some categories of guarantees, which are widely used to facilitate international trade in other countries. In fact, the banking system in Bangladesh follows traditional banking business in case of L/C and small trade finance such as deferred L/C against mortgage and security.
Long term funds
This document lists long term funding sources including debentures and term loans. It provides details on 10 individuals who have been provided debentures. It then provides an in depth explanation of debentures including their purpose, features, types, redemption options, advantages and disadvantages. Term loans are also discussed including their key features, specialized institutions that provide them, procedures for application, and advantages and disadvantages.
Similar to Debt Financing (20)
Impact of awareness on the choice of Short term Financing
Impact of awareness on the choice of Short term Financing
Different Types of Loans Offered by Commercial Banks
Different Types of Loans Offered by Commercial Banks
What all financing options are available for SMEs .pptx
What all financing options are available for SMEs .pptx
Debt Financing
- 1. DEBT FINANCING KUNWAR ATUL SINGH INSTITUTE OF MANAGEMENT STUDIES (FMS), BHU MBA III SEM. ROLL NO. 20 Mliag..
- 2. DEBT Debt is an amount of money borrowed by one party from another. Debt instruments indicating that company has borrowed certain sum of money and promise to repay it in future under clearly defined terms. Debt consists of term loan, debentures, commercial papers, over draft, public deposits, corporate deposits, discounting. Mliag..
- 3. SOURCE OF DEBT FINANCING • Trade Credit • Bank Credit • Commercial Paper • Factoring Working Capital • Debentures • Term Loan • Securitisation Long Term Mliag..
- 5. TRADE CREDIT Trade credit is the credit extended by suppliers of goods and services in the normal course of business. Mliag..
- 6. BANK CREDIT Bank Credit Cash Credit/ Overdraft Loans Purchase/ Discount bills Letter of credit W.C . Term Loan Mliag..
- 7. Cash Credit / Overdraft Under cash credit/ overdraft form/ arrangement of bank finance, the bank specifies a predetermined borrowing/ credit limit. The borrower can up stipulated credit/ overdraft limit. Limit is called as Line of Credit Line of Credit is an agreement between a bank and a firm specifying the amount of short term borrowing the bank would make available to the firm over a given period of time. Purchase/ Discount of Bills The seller of goods draws the bill on the purchaser . The seller’s bank purchase/ discount the bill and sends it to the buyer’s bank for collection. The buyer’s bank release the documents to the buyer on receipt on payment in case of demand bill or on buyer accepting to pay on due date, in case of usance bill, which does not exceed 90 days. Mliag..
- 8. Letter of Credit Letter of credit is a letter written by a bank stating that the bank guarantees payment of invoiced amount if all the underlying agreements are met. Working Capital Term Loan Under this arrangement, banks advance loans for for 3- 5 years repayable in yearly or half -yearly instalments. Mliag..
- 9. COMMERCIAL PAPERS Commercial Paper is form of financing consisting of short term insecured promissory notes issued by a firm with high credit rating. 90-180 days. Mliag..
- 10. CERTIFICATES OF DEPOSITS Certificates of deposit is a marketable receipt of funds deposited in banks for a fixed period at a specified rate of interest. Mliag..
- 11. FACTORING Factoring can be defined as an agreement in which receivables arising out of sale of goods/ services are sold by a firm (client) to the factor (a financial intermediary) as a result of which the title of goods/ services passes on the factor. Mliag..
- 12. CLIENT (SELLER) CUSTOMER (BUYER) FACTOR 1. Placed Order 2. Delivers goods & invoice with notice to pay the factor 6. Follow up 7. Pays 8. Pays Balance amount 5. Payable up to 80% 4. Sends Invoice Copy 2. Fixes customer limit Mliag..
- 13. INTER-CORPORATE DEPOSITS A deposit made by one company wit another company, normally for a period up to 6 months, is referred to as an inter-corporate deposit. Three types Call Deposits – withdrawable on giving a day’s notice Three months deposits Six months deposits Mliag..
- 14. PUBLIC DEPOSITS Unsecured deposits from the public Interest rate varying 8-12% Mliag..
- 15. RIGHTS DEBENTURES FOR WC Public limited companies can issue “rights” debentures to their shareholders with the object of augmenting the long-term resources of the company for working capital requirement. Debt equity ratio should not exceed 1:1 Debenture issued should not exceed (a) 20% of the gross current assets (b) 20% of the paid up share capital. Mliag..
- 16. Long Term Debt Financing Mliag..
- 17. DEBENTURE It is a long term security yielding a fixed rate of interest, issued by a company. Types of Debenture Convertible & Non Convertible Redeemable & Irredeemable Secured & Unsecured Mliag..
- 18. LONG TERM LOAN Term loan is a loan made by a bank/ financial institution to a business having an initial maturity of more than 1 year Mliag..
- 19. SECURITISATION Securitisation is a process of pooling and repackaging of homogeneous illiquid financial assets into marketable securities that can be sold to investors. The assets are generally secured by personal or real property such as real estate, automobiles or equipment loans. Mliag..