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Types of financing for Companies and Entrepreneurs

by Soft2share.com

Before asking for financing, look at several financial institutions with a magnifying glass because the difference between them is usually remarkable. Also study carefully what your real needs are.

Credit Policy:

A credit or a policy is an operation in which a financial institution puts at our disposal an amount of money for us to dispose of it according to our needs. We have that money there and we will spend it as we need it. The same as credit cards. On the spent they will charge an interest (could be 4% according to financial institution).

What is it used for?

For example, if for a job you need to hire people, equipment … you contract a credit policy and you reimburse it when you pay for the work.

Loan:

It is the most usual type of financing for companies. The amount of capital needed is requested and the principal is returned with interest, usually month by month. When is a loans usually requested? It is for long-term financing operations of a significant capital whether the acquisition of a fixed asset or the start-up of a large investment.

Commercial Credit:

Also called commercial discount is a deferral that companies grant their clients in a transaction of purchase sale of goods or services. You agree to pay 60 days so that you have time to sell the purchased goods to the supplier.

Renting and Leasing:

Although in Some countries we are a buyer country to go more relaxed, it is good to use these financing methods that will produce a lot of savings. It is simply the rent. Instead of buying a car, photocopier, expensive computer equipment … we can do a renting or leasing and pay monthly.

The main difference between one and another is that leasing offers the option to buy; it is more directed to the final purchase. The advantage of renting is that it usually includes the maintenance of equipment at cost. You can see the difference between leasing and renting in this article.

Factoring:

The outstanding invoices billing you anticipate them. You assign the collection rights in exchange for an interest. To be able to do it, the debtor company must be very solvent, because if it does not pay, it will not claim us but the one to whom we have given the invoice.

Microcredit:

They are personal loans, for the financing of companies or ecological and social projects. Social microloans do not need endorsement. They are usually loans of very little amount, no more than 20,000 Euros. The beneficiaries of these microcredits tend to be self-employed immigrants, followed by women and, to a lesser extent, young people and other groups.

Crowd Funding:

Crowd funding is a collective financing, usually online, that through financial or other donations, they manage to finance a certain project in exchange for rewards, participation altruistically. If the project is interesting, you move it well and offer rewards (if it is a product that you are going to manufacture the reward would be that product or service) can be a good starting point.

In the past few years, a number of online loan companies have appeared in Canada. For example, Kingston, Ont.-based SkyCap Financial offers loans of up to $10,000 with a quick and easy approval process. It’s true that most online personal loans are based on your credit score and income and do not require any type of security or collateral. With an electronic transfer, your funds can be accessed rapidly, without the wait required by other lenders, such as the big banks.

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