Sources of financing are existing or expected ways of obtaining funds. The article describes the most common sources of business financing, their advantages and disadvantages.

One of the main functions of the CFO is to find resources to finance operating and investment activities. An effective top manager always considers the full spectrum possible sources attracting funds and chooses the most profitable one. Let's look at the most common sources of financing and evaluate the pros and cons of their use.

What are funding sources?

Sources of financing are existing and expected channels for obtaining funds that the company will spend on capital investments: purchase of fixed assets, reconstruction, modernization, construction.

Based on the direction of origin, sources of financing are divided into internal and external. Internal sources of financing are the mobilization of one’s own financial resources enterprises, optimal use of reserves and earned profits. External are funds attracted by the enterprise from the external environment.

It is clear that using internal sources of financing is cheaper and safer for the financial stability of an enterprise than attracting external ones. But not always an enterprise can fully ensure its functioning independently, especially if we're talking about about capital-intensive industries. Moreover, focusing on maximizing the use of internal resources will not always be the right decision for the CFO.

Download and use it:

How it will help: understand from what sources funds are raised and monitor their receipt.

How it will help : approve uniform rules for investment management. The document sets out the procedure for justifying and approving new projects being implemented in the company. All sources of funding for the project are listed. For example, ruble or foreign currency bank loans, interest-bearing and interest-free loans from group companies, own funds.

Internal sources of financing of the organization: pros and cons

To understand the advantages and disadvantages of using certain sources of financing the activities of an enterprise, let’s consider each of them in more detail.

Net profit

At first glance, the most logical source of financing the enterprise's activities is net profit. Arguments for use of net profit to finance investments will be:

1. No interest burden on the use of net profit for investment.
2. Reducing the tax burden on business.

But there is one significant disadvantage in using net profit. The main goal of the operation of the enterprise is to increase the dividends of its owners. The more profits are spent on investment, the lower the dividend share will be. In this situation, there is no clearly correct decision, but there are three directions of dividend policy, one of which your company can adhere to.

The first direction is called “Model of the residual principle of dividend payment”. It is based on the fact that the final amount of dividends does not affect the market value of the company, and therefore the company's investment interests are more important than the interests of its shareholders.

The second direction is called “The active role of dividends in creating company value” and is based on the fact that amount of dividends paid directly affects the price of shares.

The third direction is called the “Taxation Differentiation Model” and has main goal optimize income tax regardless of the proportions of distribution of investments and dividends.

How it will help: calculate the maximum amount of borrowed funds for successful commercial activities companies.

How it will help: assess the degree of independence of the company from external sources of financing.

Depreciation deductions

The second most important internal source of business financing. The advantage of depreciation charges as a source of investment compared to others is that, no matter the financial situation, this source always remains at the disposal of the enterprise. In order to fully use the potential of depreciation charges, it is necessary to develop an optimal depreciation policy, which will consist of:

1. Selecting the useful life of the OS.
2. Selecting a depreciation method for fixed assets.
3. Annual revaluation of fixed assets.
4. Major renovation OS.
5. Reconstruction and modernization of the OS.

Thanks to a correctly chosen depreciation policy, leading enterprises refinance up to 80% of fixed assets using depreciation charges.

Accounts payable management

Reserves for future expenses

Reserves for future expenses can also be used as sources of financing. Such reserves are created for future obligations and ensure an economically justified, uniform distribution of costs over time. A competent financial director will be able to manage reserves in such a way that the company will be able to use the cash balance free from obligations to finance current activities for some time.

The only disadvantage of this method is the legislative limitation of the amounts that can be recognized as reserves and the increased control of inspection services.

revenue of the future periods

Deferred income is a great way to obtain financing without involving external sources. But, unfortunately, it is not available to everyone. The most common deferred income is state and non-state targeted financing and various types of prepayments and security payments.

More on the topic:

How it will help: create a capital structure and sources of financing that will be optimal for your company in a given period of time.

How it will help: choose from several projects the one in which it is more profitable to invest money.

External sources of financing for the company: advantages and disadvantages

External sources of financing for an enterprise are usually divided into debt and equity.

Debt financing is reimbursable financing on a repayable basis. The main areas of debt financing are: obtaining a loan, leasing, debt securities.

Credit

Credit is the most common method of investing in fixed assets, long-term loans are used, short-term loans, including overdraft ( see what an overdraft is ) and factoring. The advantages of using a loan include:

• the comparative ease of attracting it;
• the presence (often) of one lender, which entails ease of service;
• reduced rates with subsidies and/or good credit rating.

The disadvantages of the loan are:

• comparatively high cost of use;
• requirements of banks for the provision of guarantees and collateral;
• difficulty in obtaining a loan at the start-up stage of a business.

Leasing

Debt securities

These are mainly bonds, certificates and bills. They represent an alternative to a bank loan, convenient for both the investor and the borrower.

A bond is a security issued by the debtor strictly for a certain period of time, after which it must be repaid. The income from the bond is the coupon.

conclusions

As with any other financial management issue, there is no definitively correct strategy for attracting funding. For each enterprise and for each market condition, this strategy must be created anew, based on the principles of maximizing company value and competitive policy.

As an example, I’ll give Uber, which, while remaining a private company, has already attracted more than $15 billion in investments and continues to organize new rounds. Why does it need such an aggressive funding policy? Not because it really lacks resources, but because it has chosen a strategy of violent expansion and suppression of competitors by any means necessary. Experience shows that Uber has so far successfully implemented this strategy.

As a counterexample, Google increased its value of capital by more than 100 times after going public. For her, increasing share capital became a strategy for success, as for Sberbank, whose shares increased in price by more than 1,000 times.

For proper organization financing business activities, sources of financing should be classified. Note that the classification of funding sources in Russian practice differs from foreign ones. In Russia, all sources of financing for entrepreneurial activities are divided into four groups:
1) own funds of enterprises and organizations;
2) borrowed funds;
3) raised funds;
4) funds from the state budget.

In foreign practice, enterprise funds and sources of financing its activities are classified separately. Since these issues are closely interrelated, let us consider them in more detail. One of the most common groupings of enterprise funds in foreign practice is presented in Diagram 1.

In this classification of enterprise funds, the main element is equity capital.

The structure of the enterprise's equity capital is presented in Diagram 2.
There is another option for classifying an enterprise’s funds, where all funds are divided into own and borrowed funds.

In this case, the company’s own funds include:
authorized capital (funds from the sale of shares and share contributions of participants or founders);
revenues from sales;
depreciation deductions;
net profit of the enterprise;
reserves accumulated by the enterprise;
other contributions from legal entities and individuals (targeted financing, donations, charitable contributions).

Funds raised include:
bank loans;
borrowed funds received from the issue of bonds;
funds received from the issue of shares and other securities;
accounts payable.

In foreign practice there are different approaches to the classification of sources of financing the activities of an enterprise.

According to one option, all sources of financing are divided into internal and external.

Internal sources of financing include the enterprise's own funds.

External sources include:
bank loans;
borrowed funds;
proceeds from the sale of bonds and other securities;
accounts payable, etc.

There is an option to divide funding sources into:
1) internal sources are expenses that the enterprise finances from net profit;
2) short-term financial resources are funds used to pay wages, payment for raw materials and supplies, various operating expenses. The forms of implementation of funding sources in this case may be as follows:
bank overdraft - an amount received from the bank in excess of the balance in the current account. Overdraft is payable upon request of the bank. This is usually the cheapest form of loan, the interest rate on it does not exceed 1-2% of the bank’s base discount rate;
bill of exchange (draft) - a monetary document according to which the buyer undertakes to pay the seller a certain amount within the period established by the parties. The bank discounts bills of exchange by providing their holders with a loan for the period until their maturity. As payment for a loan issued on a bill of exchange, the bank charges a discount (interest), the value of which changes daily. Bills of exchange are most often used in foreign trade payments;
acceptance credit is applied when a bank accepts for payment a bill of exchange issued in the name of its clients (resale of the right to collect debts - factoring). In this case, the bank pays the creditor the value of the bill minus the discount, and upon the expiration of its repayment period, collects this amount from the debtor;
commercial loan - the purchase of goods or services with a deferred payment for one to two months, and sometimes more. The use of a commercial loan is determined by the specific type of economic activity. The appeal to him depends on the speed of sale of the goods and the possibilities of deferring payments of the enterprise itself;
3) medium-term financial resources (from 2 to 5 years) are used to pay for machinery, equipment and research work.
The purchase of machinery, equipment and vehicles by an enterprise on credit occurs on fixed terms, secured by the purchased goods, with regular repayment of the loan in installments.

The group of medium-term financial resources includes the rental of machinery and equipment. Payment for the use of leased funds is made in regular installments, while ownership never passes to the debtor;
4) long-term financial resources (over 5 years) are used for the acquisition of land, real estate and long-term investments. The allocation of funds in this way is carried out as follows:
long-term (mortgage) loans - provided by insurance companies or pension funds cash on bail land plots, buildings for a period of 25 years;
Bonds are debt obligations with a set interest rate and maturity date. A significant portion of the bonds have a face value;
issue of shares - receipt of funds through sale various types shares in the form of closed or open subscription.

The emergence of such a classification of sources is associated with the peculiarities of intra-company planning abroad, which includes long-term, medium-term and short-term planning.

When determining the need for financial resources, the following points must be taken into account:
for what purpose and for what period (short-term or long-term) funds are required;
how urgently funds are required;
whether there is a necessary funds within the enterprise or will have to turn to other sources;
what are the costs of paying off debts?

Only after a detailed study of all points is the choice of the most acceptable source of funds made.

Own sources of financing allow the company to gain an advantage over its competitors and help reduce the costs of using additional funds and reducing risks. Activities carried out independently are called entrepreneurial. Such activities are undertaken to regularly generate profits from the use of property, sales of products, performance of any work or provision of services.

Currently, organizations themselves distribute the profits that remain at their disposal. Profits are used for further development production and respecting the interests of owners, investors and employees. If a sufficient amount of own profit is directed to the development of the enterprise, then the need for additional financing does not arise.

What are your own sources of funding? These are the financial resources of an enterprise, which, depending on the method of formation, can be internal or external (attracted). Own sources of financing include:

Internal financing is carried out through the use of financial resources generated as a result of the financial and economic functioning of the organization. External financing is distinguished by the fact that the funds raised come from outside. The sources are the founders, the state, banks, individuals and various non-financial organizations.

What are the main sources of funding for the organization? The main source of financing is the enterprise’s own capital, which includes:

• authorized capital;
• retained earnings;
• special purpose funds;
• government subsidies and grants;
• other reserves.

Over time, our own sources of financing are:

• net profit of the enterprise;
• depreciation deductions;
• leasing or selling unused assets.

Advantages and disadvantages of reinvesting your own profits:

Enterprise profit

Any enterprise strives to obtain maximum profit. The main influence on profit is exerted by production volumes (product sales) and the cost of manufactured products. Net profit is the difference between the organization's income and production costs. This is the main indicator of any business, reflecting profitability.

The amount of profit is determined by the characteristics of the organization, including the cost of production, the level of sales, the number of taxes, fees and other mandatory payments. This indicator is taken into account as a result of all operations of the enterprise:

• sales of products;
• sale of property;
• financial transactions.

Profit, which is reflected in the company’s balance sheet, is the basis for many business management decisions:

• making investments;
• formation of reserve funds;
• replenishment of working capital.

The amount of net profit is an indicator of the organization’s performance. If it increases, it means that the enterprise is working at at this stage Fine. A decrease in profit indicators shows that problems have arisen that require an urgent solution. Financing of production growth can be done at the expense of retained earnings. Net profit is used for the following activities:

• dividend payments;
• replenishment of the organization's currency fund;
• combination of these solutions.

Depreciation deductions

Depreciation charges are the transfer of the cost of fixed assets during the standard period of their service to the cost of production. Depreciation also serves as an important source of self-financing for the enterprise. It is accrued to reimburse expenses for the acquisition of fixed assets, and is intended for investment in replacement of fixed assets that are retired due to physical or moral wear and tear. Depreciation charges depend on the cost of the organization's fixed assets and are received as part of financial resources for the sale of production products or services. The main purpose of these funds is to ensure not only simple, but also expanded reproduction.

The advantage of depreciation as a source of finance is that it is available in any financial situation and always remains at the disposal of the enterprise.

The amount of depreciation charges depends on the procedure for its calculation and is usually determined and regulated by the state. When a method for calculating these accruals is selected, it must be recorded in the organization's accounting policies and can be applied throughout the use of the fixed asset.

At the beginning of the operation of investment objects, the use of accelerated methods (declining balance, sum of numbers of years, etc.) will help increase depreciation charges, which will help increase the volume of self-financing. Under certain conditions, a competent depreciation policy helps to release funds that exceed the costs of making the investment. Adequate depreciation includes the reproduction of fixed assets, the policy in applying methods for calculating these deductions, the selection of the most important areas for their use and other factors.

In addition, additional funds for the activities of the enterprise can be raised through the sale or rental of main and current assets, which are not used. Such financial transactions are one-time in nature and are not considered as a regular source of funds.

Where are the sources of origin of the company's resources reflected? All financial resources are reflected in the liability section of the enterprise's balance sheet.

Attracted and borrowed sources of own funds

Despite all the advantages of own sources of financing, they are usually not enough to expand production, introduce new technologies, implement investments, and so on. Therefore, own funds are additionally attracted from external sources. The advantages of external sources of financing include:

• significant amounts of capital investment;
• the possibility of increasing production efficiency;
• independent control over the use of investments.

Disadvantages of external sources of financing:

• duration and complexity of attraction and registration;
• payment of interest, dividends;
• risk of insolvency and bankruptcy;
• the likelihood of loss of property and production management.

The basis of the financial activity of the organization is the formation and use of various funds. Through these funds, the production activities of the enterprise are provided with the necessary funds, production is also expanded, new equipment is mastered and introduced, and settlements are made with the budget and banks.

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There are several sources of external financing; all funds of enterprises are divided into the following groups:

• borrowed funds– loans from banking and commercial institutions, factoring, leasing, accounts payable;
• involved funds– consumer funds, dividend payments, future income, reserves for future expenses and payments;
• operational cash– wage fund, fund for paying dividends, budget payments, etc.

Borrowed– these are funds used to finance investments on loan terms for a certain period of time, which are returned with the payment of interest. Such funds include money received from the issue of bonds, as well as loans from banks, organizations and the state.

Attracted– these are funds provided on a long-term basis, for which payments are made to the owners of these funds of income (interest, dividends). These include income from the issue of securities, additional shares in the authorized capital, government financing, etc.

Pros and cons of borrowed and attracted sources of financing:

Owners of enterprises who decide to place securities on the stock market conduct their business in such a way as to minimize possible losses from dilution of their own stake and not lose the opportunity to manage the organization. Many large shareholders manage to retain a controlling stake after a public offering of securities.

In general, today it is more convenient and profitable for enterprises to attract external loans, as cheaper, simpler and more effective ways to raise capital.

In particular, all sources of investment financing are divided into:

Internal;

And external ones.

To internal sources investment financing include:

1) own sources, which include:

Depreciation (sinking fund);

Net profit of the enterprise;

Reserve capital;

Special purpose funds;

Facilities authorized capital(which is formed when creating an enterprise);

Founders' funds, etc.

External sources include:

1) attracted sources are funds that are raised from the market by issuing shares, in the form of charitable contributions, scientific grants, as well as funds allocated by budgets of various levels. This source of financing is fully available only to joint stock companies in the form of issuing shares;

2) borrowed sources are funds that are raised on repayment terms (that is, these funds must be returned to the lender within mandatory), urgency (these funds are raised for certain period) and payment (funds are raised at a certain percentage). Borrowed sources of investment financing include: loans and borrowings from banks; issue of bonds; bills, etc.

In table 10 shows a comparative description of own, attracted and borrowed sources of financing.

Table 10 - Comparative characteristics various sources of financing

As already noted, indirect sources of investment financing are those sources that do not directly affect the value of the organization’s property. TO indirect sources relate:

1)leasing According to the Federal Law “On Financial Lease (Leasing)”, “leasing is a set of economic and legal relations arising in connection with the implementation of a leasing agreement, including the acquisition of the leased asset.” A leasing agreement assumes that the lessor (lessor - the person who leases the property) undertakes to acquire ownership of the property specified by the lessee (lessee - the person who leases the property) from the seller specified by him and to provide the lessee with this property for a fee for temporary possession and use.

That is, the traditional leasing scheme involves the participation of three parties:

– lessee – an enterprise that is interested in purchasing for its production activities certain property;

– lessor – an organization that, at the direction of the lessee, purchases the equipment necessary for it from a certain supplier, and then leases this equipment to this lessee;

– supplier (seller) of property.

It should be noted that the subject of leasing can be any non-consumable things, including the enterprises themselves and other property complexes, buildings, structures, equipment, vehicles and other movable and immovable property that can be used for business activities. The subject of leasing cannot be land and other natural objects, as well as property that is prohibited for free circulation by federal laws or for which a special circulation procedure has been established, with the exception of military products.

Leasing is most often resorted to by companies that, on the one hand, do not have enough own funds to purchase the required property, and on the other hand, their financial condition is such that banking and other credit organizations will refuse to issue them a loan. That is, leasing is more attractive for enterprises with a relatively unstable financial situation that cannot guarantee the return of loan funds. In addition, the subject of leasing (property that is purchased under lease) in itself is security for this transaction. But, on the other hand, lease payments are usually higher than loan payments.

The traditional leasing scheme is shown in Fig. 2.

The property under the leasing agreement is the property of the lessor, and is reflected in the lessee's off-balance sheet accounts, therefore the value of the lessee's property is not directly reflected;

2)franchising(or, according to the Civil Code of the Russian Federation, a commercial concession agreement). In this case, “... one party (the copyright holder) undertakes to provide the other party (the user), for a fee for a period or without specifying a period, the right to use in the user’s business activities a set of exclusive rights belonging to the copyright holder, including the right to a company name and (or) commercial designation of the copyright holder, on protected commercial information, as well as on other objects of exclusive rights provided for in the contract, trademark, service mark, etc.” A commercial concession agreement provides for the use of a set of exclusive rights, business reputation and commercial experience of the copyright holder to a certain extent (in particular, establishing a minimum and (or) maximum volume of use), with or without indicating the territory of use in relation to a certain area of ​​business activity (sale of goods received from the copyright holder or produced by the user, carrying out other trading activities, performing work, providing services).

Essentially, franchising implies that a large, well-known enterprise grants another enterprise the right to use its trademark, its technology, a proven business system, etc. The most famous examples of the use of franchising in Russia are the sale of the 1C accounting program, the fast food McDonald's, organization of production of passenger cars from well-known manufacturers, etc.;

3)factoring. According to Civil Code Factoring involves “financing against the assignment of a monetary claim.” Under a financing agreement for the assignment of a monetary claim, one party (financial agent) transfers or undertakes to transfer to the other party (client) funds to offset the monetary claim of the client (creditor) to a third party (debtor). This type source of investment financing actually involves the enterprise selling its receivables to a specialized factor firm. The factoring scheme is shown in Fig. 3.

Factoring is reflected in the structure of the organization’s property, in particular, in fact, accounts receivable are “transformed” into cash, but have virtually no effect on the organization’s balance sheet. In practice, factoring is most often carried out by banking organizations, as well as collection agencies.

Other sources of investment financing may also be used.

3.4. The concepts of “capital”, “funds”, “funds”, “investments”

Quite often, concepts such as “capital”, “funds”, “funds”, “investments” are used in relation to property. Let us dwell on these concepts in more detail. In theory, under capital refers to material and financial resources, intellectual developments, entrepreneurial skills, etc., which are involved in the production process and serve to make a profit, i.e. capital- this is everything that an organization uses in its activities to make a profit. Capital in an organization can exist in several forms:

– in cash (for example, funds in a current account, at the cash desk);

– in production form (these are means used in production, for example, buildings, equipment, etc.);

– in commodity form (these are stocks of finished products in a warehouse).

Capital has a cost and natural (real) expression. At the same time, under funds refers to the material state of capital, and means, as a rule, refers to the value expression of capital. However, in everyday life, as a rule, no distinction is made between these concepts.

The concept of investment is regulated Federal law"On investment activities in Russian Federation carried out in the form of capital investments.” Investments are understood as “...cash, securities, other property, including property rights, other rights that have a monetary value, invested in objects of entrepreneurial and (or) other activity in order to make a profit and (or) achieve another useful effect” , i.e. investments are everything that is invested in entrepreneurial activity in order to make a profit, and capital is what the organization already has at a particular point in time.