When a company needs fresh money, there are a seemingly endless number of types of funding available to them.

Why is funding so important?

Companies need fresh money on a regular basis.

The most common reasons for funding are:

  • Initial investments in order to be able to start a company in the first place
  • Cover costs for product development
  • Financial bridging of the time between delivery of goods and payment
  • Investments to expand the company or individual business areas
  • Whenever a company wants to develop further, it needs money.

Internal and external finance: where does the money come from?

The first way to differentiate between the various forms of financing is based on the origin of the money: Where does the money for the financing come from?

Internal financing: money from your own company

With classic internal financing, the money comes from your own business activities. So no outside help is needed to raise the necessary sums.

The most important and simplest example of internal financing is profit. If the business is successful, the company can make a profit from it. This money can then be used to finance various measures, such as investments in further training for employees or to expand production. Some businessmen won in online gambling platforms such as bandarqq and used the money to start a business.

External finance: money from external sources

With external financing, the capital does not come from the company itself but is brought in from outside. There are various ways of obtaining external financing.

The simplest case in practice is to increase the deposits. The shareholders make additional money available from their private assets. The concrete implementation is relatively simple. However, it must be remembered that the shareholders generally only have limited capital. This form of external financing is not particularly suitable for larger sums.

This problem can be solved by adding new shareholders to the company. They invest their money in the company and receive company shares in return. This method is often used in young companies, for example, as the chances of getting a classic loan shortly after the establishment are often very low.

Post Author: Fiona Quinten

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