Mr. X owns a textile company worth 100cr that wants to expand. He needs 25cr but cannot afford the high interest rates from banks. He considers selling 25% ownership as shares on the stock market to raise funds without high interest. Long-term financing provides money for over 10 years and is used for expansions, fixed assets, and large construction projects. Businesses can raise long-term funds internally through retained profits or externally through loans, bonds, or issuing shares.

2. MD. MUWAS MIA
151-11-4362

3. WHY DO BUSINESSES NEED FINANCE?
For
Starting
Up
Expansion Internal
Growth
Replace
Equipment
Everyday
Bill
Payments

5. X Textiles PVT. LTD
Value of
company 100cr
Wants To Expand Business

6. WHAT TO DO???

7. Need Fund to Expand…
Profit not Sufficient
to fund Expansion
I need 25cr
as lone
You need
to pay 15%
Interest

8. What To Do ???
Interest Charge
Vary high, can
not pay so
much
I will sell my
ownership as
share on stock
market
25% Ownership split
into 25 lakh shares
each worth 100tk

9. From Bank…
Mr. X can approach bank, but it will not prove
healthy option because:
Bank will charge him high interest rate
Bank scrutinizes the paper, documents
Very time consuming process

10. LONG TERM FINANCING- Meaning & Purpose
Long term financing that is
provided for a period more than 10
years. Long term financing also
known as Fixed Capital Finance.
Expansions of Companies.
To Finance Fixed Assets.
Construction of Projects on a large
Scale
Increasing Facilities.

11. TIME PERIODS OF FINANCE
SHORT TERM
LONG TERM
MEDIUM
TERM
Less Then 1
Year
7 to 15
YEARS
3 to 7 Years

12. SOURCES OF LONG-TERM FINANCE
A Business Essentially Has The Choice of Raising Finance by
Borrowing or Through the issue of shares…
Sources of Long-Term
Finance
External Internal
Long term
loans
Issue of
Shares
Sale and
leaseback
Retained
Profit

13. LONG TERM LOAN (EXTERNAL)
An amount of money is borrowed from bank then repaid (with interest)
over a set period of time (10 years +)
 Used for expensive pieces of machinery
 Loans for buildings- Mortgages
 A secured term loan will usually have lower interest rate than an
unsecured one.

14. ISSUE OF SHARES (EXTERNAL)
A share in the business is sold to an individual or another business also
known as Equity Finance. This money is used to purchase new assets.
Shareholders are entitled to a Dividend
(Share of company Profits)
Private Company LTD. Restriction on transfer of shares and
value are not available as they are not traded in Stock Market.
Public Company shares are traded on the stock
Market.

15. INTERNAL FINANCING
Profit Retained for the
Purpose of Using in Future.
Sale and
Leaseback
Retained
Profit
SELLER
LANDLOEDTENANT
BUYERS
Sell Property
Becomes
Leases Property
Becomes

16. SHAHREEN IVITA
151-11-4411

17. SOURCES OF FINANCE
Sources of Finance can
be Either..
Internal External
Retained Profit
Personal Savings Shares, Overdraft
Loans

18. INSTITUTIONAL SOURCES LONG TERM FINANCING
• Commercial Bank
• Investment Bank
• Insurance Company
• Leasing Company
• Specialized Financing Institutions

19. METHODS OF RAISING LONGTERM FUND
(VENTURE CAPITAL)
Venture Capital has four main player entrepreneurs who need funding,
investor who want high returns, investment bankers who need companies
to sell and venture capitalist who make money for them.
IDEAS IPO
ENTREPRENE
URS
PRIVATE
INVESTORS
INVESTMENT
BANKERS
VENTURE
CAPITALISTS
PUBLIC MARKETS
AND CORPORATIONS
STOCK

20. STAGES IN THE INDUSTRY LIFE CYCLE

21. ADVANTAGE OF LONG TERM FINANCING
 Control Over Management
 Improves Financial Strength
 Possible to Control Cost
 Less Cost of Fund
 Possible to Implement Long-term Plan
 Easy to Raise Fund

22. DISADVANTAGE OF LONG TERM FINANCING
 Higher Income Tax
 Effect on Financial Condition
 Over Capitalization
 Limited Utilization of Fund

23. A BUSINESS’S CHOICE OF FINANCE
The Business’s choice of
source of finance depends
on several factors!!!
There are too many
considerations. I
don’t know which
sources to choose!!!

24. THANK YOU
