The forms of corporate financing can be differentiated according to the origin of the capital and the legal status of the investor. Depending on the origin of the money, they are further divided into internal and external financing.

Financing according to the origin of the capital

Where does the money come from? The central question is how to differentiate between internal and external financing. These two types of financing can still be divided into equity and debt financing, depending on the type of capital that flows into the company.

Internal financing – from your own resources

The funds for financing the company from within are generated from their own resources, for example, the profit made. Traders can use this for new investments. Another form of internal or endogenous financing is redeployment. In doing so, they sell machines and office equipment that are no longer needed. This type of fundraising is particularly useful for restructuring. Internal financing also includes raising funds through depreciation and provisions. It can also include investing in forex trading sites.

External financing – with the help of external donors

With exogenous or external financing, the company receives money from outside. Often the capital injection takes the form of credits and loans. Leasing and factoring are also part of the external inflow of funds.

Another possibility is the provision of additional capital by the founders or the shareholders. You add money to the company from your private assets and thus increase the deposits made by you as a trader.

Financing according to the legal status of the investor

Depending on whether the money is available to the company as equity or not, a distinction is made between the two types of equity and debt financing.

Self-financing – participation in the company

Self-financing is also called equity financing or deposit financing. If money is added to the company that is transferred to the company’s equity, it is referred to as self-financing. A corresponding inflow of funds can be made against the issue of shares. The money brought in is then available to the company in the long term. The equity ratio of trading provides information about how high the share of equity is.

Post Author: Fiona Quinten

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