What is external finance?

external finances is in any way that company increases funding other than using its own money. This most often involves issuing its own capital in the company, such as the sale of shares. It may also include loan reception. In general, increasing external financing has higher costs than internal financing.

There are two main ways to raise money. One of them is internal financing, which covers money generated by the company, especially its annual profits. Internal financing may also include some other methods, including the sale of physical asset, such as a building. Another way to raise money is external financing, which usually involves getting cash from an external source without providing goods or services in return. The place of surrender of goods and services usually gives up debt or capital to external finances.

Financing through debt involves receiving loans. It may be more from investors thanthe day from one bank. The best -known form is the GH Crossbonds, which is a promise to repay cash plus interest, on a fixed date. Unlike most loans, the bond can be sold to another investor, which means that the company can terminate cash repayment to someone other than who they borrowed from.

funding through its own capital includes the sale of the company's share. This is also known as a problem with its own capital. In some cases, this is done by a private arrangement with a designated investor. In other cases, this includes the "public" in order to publicly trade shares in the company.

The first time the company is done is known as the initial public offer. This is not a cheap option, because there are very complicated rules in IPO, especially how the company explains its financial situation to potential shareholders. After IPO performs budsOwn problems with your own capital known as the offer of secondary capital. This can either include the company's owner selling some of its own shares or a company that creates new shares that will be publicly selling. The second situation is referred to as shares dilution, because it means that every shareholder now owns a smaller part of the company.

There are several aspects of business that are classified as external finances, even if they are not suitable for the company formula and are looking for it. For example, many companies negotiate agreements with 30 or more days to pay for goods they buy, such as raw materials. This allows them to effectively have "free" materials until the payment date, which is calculated as a form of financing.