Which source of business financing is internal. Internal and external sources of business financing

Business financing- this is supply money (financial resources) or the allocation of money (financial resources) for something.

In cases where financing is aimed at making a profit from this supply (allocation), it turns into investment(or investment financing). Investment financing, as a rule, is aimed at supporting the company’s image, rating, and profitability. At its core, the investment type of financing is designed to attract another type - trade finance, that is, direct support of the company's capital.

In a broader understanding of this concept, the following can be distinguished: types of financing:

• paid (compensated) - credits, loans, leases, loans;
• free (gratuitous) - gift, donation, subsidy, grant, subsidy, etc.

Types of funding sources.

All sources of financing in business can be divided into external and internal.

Internal source refers to the company's personal property. Firstly, this profit, that is, the difference between the company’s income and the cost of goods or expenses. Distinguish gross profit(i.e. total profit, excluding taxes) and residual income(i.e. the net profit remaining after deducting all expenses). Secondly, it is a reasonable distribution of reserves. Goods purchased or sold on time allow you to make additional profits.

There are many external sources of funding:

• other companies (the partnership element is one of the main ones in business);
• shares (selling shares allows you to attract financial resources outside the company);
• banks (loans are the most popular sources of financing);
• commodity loans (or trade loans - a type of loan that is given not by a bank, but by another company in the form of goods);
• state ( budget financing or government order).

The main sources of business financing are the allocation of funds for the opening of an entrepreneur’s idea. To develop a company, it will be necessary to attract financing and investments; the entrepreneur chooses the sources of funds, focusing on the methods of obtaining financing. With the development of business, new types of investments have appeared, which are divided into categories.

Investing money in entrepreneurship is the use of not only personal funds, but also attracting money from outside, the transaction is confirmed by an agreement and sealed with a signature, it is a document that is endowed with legal force.

Decoding the concept

To open an enterprise and implement a business plan, investments are required; in the tax code there is a concept of a source of business financing - these are the financial resources that an entrepreneur receives to open a business from external or internal sources.

Money is invested in various business operations that ensure the development of the enterprise.

Economic practice involves 2 sources of financing:

1. Finance raised from internal sources is a cumulative system of funds from the profits of the company. Income from doing business has a cumulative system; for the further development of the enterprise, specific funds are used. These are income items: debt, reserve funds, amounts for sold real estate or business income.
2. External sources of business financing are finances that an entrepreneur attracts from outside. Investments of this category can be attracted from investors, financial institutions or borrowed. The subjects of external financing are banks, government agencies, legal entities.

The source of raising funds is an economic category. Economic instability affects the ability to attract external financing; most business entities rely on internal reserves. The organization makes deductions provided for by federal law, and the company also retains funds that are necessary to pay bills, company expenses, and depreciation charges.

The profit received from production activities is the property of the founder. Income is distributed for business development, and part is set aside for reserve capital. Depreciation savings are funds that accumulate during the use of fixed capital. The amount of depreciation funds depends on the focus of the enterprise and its scale.

These savings are used to purchase and replace intangible components of the labor process.

Internal and external sources have different potential, so attracting finance for the development of an enterprise must be defined by defining each concept. Financing a business from external sources is raising funds from outside.

1. Trade loans are forms of commercial lending that involve the transfer of goods by the lender to the borrower by mutual consent of both parties. A cash loan involves borrowing foreign currency, a bank loan requires strict adherence to rules. A financial institution borrows funds for a specific period, while applying for a loan is a paid service, the bank needs guarantees of repayment, all points are described in the contract.
2. Allied firms. If a company has the same problems with its allies, then their forces are combined, thus benefiting from scale and overall economies.
3. Shareholders sell shares; most enterprises consist of tens or hundreds of shareholders.
4. State budget financing, organizations receiving funds from structures are state-owned and the income is not an entrepreneur.

The type of lending requires the signature of a mutual agreement, contract; the document confirms the rights and obligations of each party and regulates their relationship.

The need for lending arises in both large and small enterprises; government agencies provide programs to ensure the financial security of entrepreneurial work.

The source of the loan is the stock market, business entity, state, owners, and employees of the enterprise. Those loans that relate to external sources of project financing have a wide range of choices and flexible programs.

Receiving financial support means helping an enterprise during its development stages. The owner chooses the types of business financing independently, focusing on the production process. Every entrepreneur has the right to receive funds.

Federal legislation stipulates the types of financing; after a comparative analysis, the best option is selected:

• lending;
• leasing financing;
• trade loans;
• state subsidy.

Economic activity involves attracting investment. To maintain the right to full ownership of the enterprise, owners raise funds from government programs.

Financial institutions offer credit transactions, the conditions are determined by the agreement. Short-term liabilities and loans are in first place in the ranking of sources of raising finance.

Loans from the bank are used to pay off costs from the industrial and agricultural sectors, and to pay off mortgages.

Financing through a bank has advantages and disadvantages:

1. The speed of receiving funds, many banks provide services within several hours or days, depends on the loan amount. An entrepreneur independently distributes money, without a controlling party, an investor.
2. The negative side is the short debt repayment period of up to 3 years. According to the loan program, the bank imposes interest, insurance premiums on the borrowed amount. Depending on the lending, requirements from the bank are acceptable.

Loans are taken from financial institutions with strictly established requirements, the transaction is certified by a loan agreement, specifying the conditions. Loans have a positive and negative side; if a quick source of money is needed, then entrepreneurs turn to the bank, but agree to the lender’s requirement.

Leasing program

Business development is impossible without attracting investments; if the owner wants to reach a new level, he will need internal or external sources of business financing. Leasing is an opportunity to receive funds from a fixed asset; the opportunity is presented to the entrepreneur, subject to subsequent repurchase. The subject of leasing is not only cash. These are: land, transport, real estate, movable property, equipment.

The program has general characteristics:

1. The program does not require the presentation of collateral; this is the leased product, a real estate object. The general leasing conditions are acceptable in relation to a loan from a bank; the entrepreneur’s payment relates to the specifics of the enterprise’s activities.
2. The negative point is the payment of a down payment; depending on the scale of the purchase, the amount reaches up to 30% of the price of the property.
3. If the owner of an organization has a simplified taxation system, then he should check with the leasing company about the conditions for obtaining a loan. Tax is charged on the amount of such lending.

You can take money from support funds strictly following the established rules. Depending on the specifics of the operation, the enterprise chooses a leasing company.

Trade loan

When opening an enterprise, the owner enters into contracts with suppliers and other companies. Interaction with companies allows you to buy goods, products in installments or with a deferred payment. This method is acceptable for entrepreneurs who sell goods not of their own production. The owner purchases the lot and makes payment after its sale.

The situation on the economic market requires attracting financing. An entrepreneur starting to work counts on benefits from the state. To implement the business plan, a subsidy is allocated - a one-time payment from state financial institutions, regional authorities, international charitable organizations, foundations. The funds cover part of the expenses for opening the establishment and paying off fees.

Federal legislation regulates the legal procedure for opening an individual business, regarding the taxation system.

Individual entrepreneurs receive tax deduction cancellation or tax holiday:

• registering a business for the first time;
• chose a simplified taxation system, patent;
• The enterprise is involved in the scientific, social, and production fields.

Benefits apply for 2 years during the development and operation of a private enterprise. They allow you to save money and invest money in the future.

Loans are taken on repayment terms; the source of raising funds for business development complies with the established lending program with the repayment of interest on the loan.

Positive and negative aspects of internal and external sources of financing

The source of funding has different directions; receiving grants for starting a business is gaining popularity. International charity companies offer to capture interesting ideas from young entrepreneurs.

An attractive source for business development is a grant - this is a free targeted subsidy.

This method of investment has positive aspects; in order to receive funds, it is necessary to correctly draw up a project and interest the organization.

After analyzing business financing, sources are identified that have positive and negative sides. Every year there are government programs to stimulate and develop small businesses, subsidies are valid in the long term. Each type of fundraising has positive and negative sides.

Internal sources of financing have the following characteristics:

1. The positive side of attracting domestic investment is a simple scheme for obtaining funds, without requiring the permission of outside individuals or legal entities.
2. There are no additional interest payments, there is lending.
3. The negative point is the limitation in the amount of funds, the inability to increase funds.

External sources have the following nuances:

1. A positive factor is the unlimited funds, the growth of the organization’s potential, the development and growth of the company. Increased profits after financing, jump in business profitability.
2. Credit obligations are a risk of bankruptcy; repayment of interest and payment of installments reduces the final profit.
3. Regardless of possible difficulties, the entrepreneur is obliged to fulfill the conditions established by the financial institution and specified in the contract.

An individual entrepreneur independently chooses the way to develop the enterprise, taking into account the pros and cons of financing.

The source of financing is attracted investments; the owner of the company independently chooses an acceptable option. The types are established by law, have a positive and negative side, and before using auxiliary means, an analysis of the economic market will be required.

The heads and managers of financial structures of current domestic enterprises are showing serious interest in selecting and finding ways and means to finance their business.

Banks and stock markets provide an opportunity to consider various proposals on this issue, explaining their features, correlating them with changes in the money market.

We invite you to consider the standard and most effective methods of obtaining capital for business development.

The source of finance for a businessman can be classified as either external or internal.

The first category includes those assets, monetary units that the organization receives “from the outside,” from companies from which the business is not directly dependent, for example, a bank, investors, investments. Which tool to use and direct is determined according to several main points:

• Price
• Passive, exactly its type
• Necessity and timing

Sources "from outside"

This type is divided into equity and debt. In the first case, the company uses its own funds, in the second, it takes out a loan. Investors believe that the latter financing instrument is more profitable, since the very cost of such an instrument already takes into account a small insurance amount, “at risk.” Business owners also see their benefits in this type of financing; in this situation, there is no need to allocate money to the lender in the organization.

The disadvantage of such an instrument is that it makes the company dependent on situations in the economic market; during a recession, for example, the organization may not be able to repay the loan.

Debt financing, types

• Syndicated loan

This form is used if one bank is unable to issue the requested amount of funds. Then the creditors form an association, and certain contractual relationships are drawn up both within the syndicate and with the loan recipient, which determine the algorithm of actions for repaying the loan.

According to statistics, our banking organizations use this method extremely rarely as a source of financing; Western companies use it more often.

An alternative to this method is bonds.

• Bonds

Issued by large companies in order to attract additional funds. Such papers can be freely available and can be easily purchased and sold. Sustainable enterprises that are able to make a forecast of the economic situation issue bonds denominated in foreign currency.

• Overdraft

In essence, this is a short-term loan. Overdraft is divided into classic, advance, and collection. A significant difference from a loan is that it is repaid in full, using funds written off from the card. The advantage of it is that to register it you do not need any additional documents other than your own bank plastic card with the limit on it. For this type of lending, it is enough that the movement of funds on the card is constant. The downside is high interest rates and a short period for repaying the loan.

• Leasing

Another form of lending is when the lessor leases some type of property for a long term with the option of either returning it or purchasing it. The advantages of leasing are that the profits of enterprises using leasing are subject to less tax. Leasing allows business owners to update their technical base. If, in a situation with a loan, you have an agreement that will prescribe clear terms and amounts of payments, then you can always agree with the lessor on terms that take into account your capabilities. Interest rates on leasing are usually several percent higher on the loan, however, despite this, the total benefits from this type of lending as leasing are greater than from a classic loan.

• Credit based on rating agency

In this case, the rating agency is the bank's guarantor and indicates whether the issuer can fulfill all its obligations. Based on their opinion, lenders and entrepreneurs decide which source of financing is most profitable and where demand is higher. With a positive assessment from the rating agency, the competitiveness of the enterprise increases.

• Secured loan

A secured loan must be secured by some valuable property that will ensure that the organization issuing the loan that you will definitely repay the amount of money issued. The property is sold only if the borrower fails to meet its debt obligations. The disadvantages are that such a loan requires more time to process and is associated with the risk of losing the pledged property. Plus - the interest rate is much lower compared to a classic loan.

Government lending

• Direct capital investments. These funds are directed to enterprises located in the public sector. Accordingly, all profits are state-owned.
• Subsidies. Allocation of small amounts, incomplete or partial financing. It covers both private and public companies. The positive feature of this type of financing is that it is interest-free, free and gratuitous.
• State order. The state acts as a buyer and forms an order for the production of a particular product to a specific company. An example is Russian Railways. The road is state-owned, and what moves along it is created by private organizations. In this case, the state does not spend money on production, and the manufacturer receives a profit from sales.

Equity financing, types

Raising funds through shares. Shares are issued by those organizations that have established themselves in the market and have stable cash flows. Shares may be offered initially, secondarily, partially or in full.

• Venture capital

Funds used for investment by an external investor through third parties in new, growing enterprises, or in those that are on the verge of bankruptcy. This type of investment involves high risk, but also income, the size of which is defined as “above average”. Through venture investments you can also acquire a share of the company in ownership.

• Syndicated investments

A united group of investors (who have the romantic name “business angels”), on their own initiative, invests in projects that they consider the most profitable. This method of receiving funds is also associated with the risk of lack of benefits (a business angel invests his own funds), but is practically free of bureaucratic delays.

Internal sources

Such funds are generated as a result of the operation of the enterprise. This includes: sales income, gross profit. This may include:

• Profit that is not distributed

These are funds that remain with the organization after it has paid all taxes and carried out all cash transactions on shares. Such money is sent to the company's assets and used for its further development and growth. Such funds can be allocated for the purchase of securities or simply stored in the feed of the cash balance.

• Automatic financing

Funds resulting from an increase in the size of the liability (increase in loan debt) when accruing (but withholding) wages to employees. Such funds are automatically distributed for the needs of the organization. This type comes with huge risks in the form of increasing the company's financial obligations.

• Factoring

Includes three parties: the factor (buyer of claims), debtor (buyer of goods) and creditor (supplier). In essence, this is speculation in short-term receivables, usually at a discount of 10 to 60 percent. A type of short-term loan secured by company assets.

• Capital optimization

It involves the creation of certain projects aimed at increasing or decreasing profitability. In this case, as a rule, comprehensive measures are taken that allow free funds to appear, which can be reinvested in other areas of the organization’s work, aimed at expanding it or creating new projects.

• Resetting a non-core asset

Assets that do not bring monetary benefits, on the contrary, distract funds and attention. In this case, the best solution is to sell such assets, and the proceeds must be transferred to the direction that the company considers a priority.

• Depreciation fund

Depreciation is the wear and tear of production facilities, or rather, its monetary expression. The amount of money from which the fund is formed, aimed at these needs, is included in the cost of manufactured products, and accordingly affects the price. The main tools of the enterprise are repaired, replaced or rebuilt from these funds. The required amount of deduction is calculated from the original price of the asset for which depreciation is calculated. If equipment needs immediate repair or replacement, then the company can take the path of accelerated depreciation. In this case, deductions are made in a larger volume than the normative ones. This method is recommended only for large businesses, since when purchasing new equipment, volumes increase, the quantity of goods produced increases and depreciation is calculated on a larger number of products, and, therefore, prices do not rise.

For businesses, both start-up and already developed, entrepreneurs are looking for sources of financing. Enterprises and organizations develop and live when there is constant financial income. At the same time, your own cash savings are often not enough to open and organize your own business. When drawing up a financial plan, you need to consider sources of financing.

Sources of financing can be divided into two types:

These two forms of business financing can be used either separately or combined with each other.

Business financing

For the successful development of any business, it is necessary to find funds; without free money, a business dies out.

Also The state has programs for obtaining grants, budget subsidies, and loans at a lower rate. When distributing public funds, more attention is paid to innovative, socially oriented, and production enterprises. You will need to report for the funds received that they were used for their intended purpose. Some programs provide funds free of charge.

Many aspiring entrepreneurs are looking for sources of business financing to start their own business. This could be a loan, investment or receiving a grant. In this article we will talk about the features, advantages and disadvantages of these types of investment.

Today there are plenty of ways to find money to start your own business, which allows a novice entrepreneur to organize a small, medium or large business.

Main sources of financing

There are external and internal financing. Internal is the use of equity capital (net profit, deductions), and external is the use of borrowed and attracted capital.

To organize a business, external investments are often required. This could be a bank loan, third-party investment, or a grant. We will consider the features of these types later. In the case of an organization, self-financing can be used. Naturally, this is the best option, because you will not have to pay interest or “share” your new source of income with someone.

Direct and debt financing

Today, debt financing is considered the main source of raising money. It is advantageous in that it does not involve partial sale of the business to another person. Often, attracting debt capital brings good results. The main goal of such investments is not to gain complete control, but to fix income for a period of 1-3 years.

Direct investment is an investment in equity capital to generate income and the right to participate in the management of the company. The investor has the right to participate in the board of directors, he influences the formation and change of the business management team, and proposes strategies for the development of the enterprise. As world practice shows, direct investment is the purchase of more than 10% of the authorized capital of an enterprise.

The investment method is chosen depending on your goals. If you are going to open a large production, it is much more effective to take.

How to get financing?

How to get financing is an important question that worries not only beginners, but also more experienced entrepreneurs. You need to look for financing options after the business plan for the project has been drawn up. This is an extremely important document, without which one can not hope for external investment. Banks and investors need to be provided with a plan. It is important for banks to ensure that the loan is repaid on time. As for investors, they need to know how long it will take for the company to become profitable and profitable for them. About why it is needed and how to develop a business plan.

When seeking funding, you must go where people want to see your plan. Present it without exaggerating sales volumes and try to make it different from other plans. If you have ownership of real estate where you plan to organize a business, for example, open a chip manufacturing plant, a bakery or something similar, and the value of this real estate is enough to repay the loan, then you can count on a loan from almost any commercial bank.

Benefits of lending

Often business lending commercial banks carry out this without any problems, but only if the business is already developed and brings in a stable income, or if the borrower has already developed one business and is going to open a new one. If you are planning to take money to start a business on credit from scratch, prepare for difficulties.

Consumer loan from a bank

If you are more attracted, and you don’t think about a large enterprise, take out a consumer loan from a bank. Many Russian banks provide loans up to 100,000 rubles without collateral, without proof of income and without guarantors. To obtain larger loan amounts, you will need a guarantee, collateral or certificates.

Money secured by property

If you have a car, apartment, non-residential premises or other valuable property, you can take out a secured loan. To develop a large business, the funds offered by the bank are often not enough. We also note that only with 100% confidence in success can you think about lending.

Investment

Investment– a good option for getting money to start your own business. The search for investors means that you need to find a partner who is willing to partially or fully finance your endeavors.

Finding an investor is a difficult but very real task. Investors are prudent and cautious people; they will not give you money for something that may fail. To attract investors or partners, you will need a carefully thought-out business plan, and it is better to turn to specialists on this issue. About how to develop this document Lenders must be more than confident that the business in which they are investing their own money will be profitable for them.

How to get a grand?

Grand is the best alternative to a bank loan and other types of financing. The advantage is obvious: the grand does not need to be returned. But keep in mind that grandees are not intended for you to waste money just like that. The one who pays the money is interested in you solving his problems.

Often on business giants Budget funds are allocated for the development of small and medium-sized businesses. People pay money because they want to develop a priority type of activity for a certain region. For example, it is quite possible to receive a grant to create a waste processing facility, research new energy-saving technologies, to improve the environment, etc.

Grants are provided for innovative projects that involve serious scientific developments. The main Russian source of grants is the state Fund for Assistance to the Development of Small Enterprises in the Scientific and Technical Field. Sometimes money is allocated by large manufacturing companies that are also interested in developing high technologies.

Finally, let’s say that one of the most promising areas where serious investments are not needed is an online business, the ideas of which can be developed. In this area, a few thousand rubles are enough; you can also engage in activities where you don’t need money at all, only knowledge.