Classification of sources of corporate financing.

Corporate finance.Managerial or corporate finance is the task of providing the funds for a corporation's activities. For small business, this is referred to as SME finance. It generally involves balancing risk and profitability, while attempting to maximize an entity's wealth and the value of its stock.

To do this, a company must:

· Identify relevant objectives and constraints: institution or individual goals, time horizon, risk aversion and tax considerations;

· Identify the appropriate strategy: active v. passive -- hedging strategy

· Measure the portfolioperformance

Financial management is duplicate with the financial function of the Accounting profession. However, financial accounting is more concerned with the reporting of historical financial information, while the financial decision is directed toward the future of the firm.

Capital, in the financial sense, is the money which gives the business the power to buy goods to be used in the production of other goods or the offering of a service.

Classification:

· Long Term - usually above 7 years

o Share Capital , Mortgage, Retained Profit,

o Venture Capital, Debenture, Sale & Leaseback

· Medium Term - usually between 2 and 7 years

o Term Loans, Leasing, Hire Purchase

· Short Term - usually under 2 years

o Bank Overdraft, Trade Credit, Deferred Expenses, Factoring

Equity Issuance.Organizations get funding also by issuing stocks--or shares of ownership--in the capital markets. They may issue those shares privately to institutional investors, especially if the organization is not listed on a securities exchange. Investors who buy stocks--also called shareholders or stockholders--do not receive periodic interest payments; however, they receive dividends on a periodic basis, and make profits when the stock increases in value. Shareholders hold voting and management rights with respect to companies in which they invest. For example, they are invited to the annual shareholders meeting and may vote on management's change and compensation, merger with another firm or dividend payment.

Debt issuance Companies may borrow by issuing bonds or other forms of debt in financial--or capital--markets. They may also borrow directly from private institutional investors such as banks, hedge funds, venture capital firms and brokerage companies. Investors who lend to entities are called bondholders. They might be paid interest on a semi-annual or annual basis; the amount lent is reimbursed at maturity--that is, the end of the holding period. They hold no voting or management right with respect to the debtor. For example, a bondholder in Company A might receive interest payments twice a year from the debtor, but will not participate in the annual shareholders meeting.

Hybrid Financing.Companies may raise funds by issuing financial instruments with debt and equity features. Such instruments are called hybrid instruments or quasi-debt. There are two types of quasi-debt: convertible bonds and preferred shares; they pay fixed dividend but do not confer voting or management right on the owner. Holders of convertible bonds may convert such bonds into equity in accordance to the bond agreement. For instance, a holder of Company A's bonds might convert such bonds into shares if the stock has increased substantially in value after a period of time.

43. Methods of companies’ capital attraction from international financial market.

Capital, in the financial sense, is the money which gives the business the power to buy goods to be used in the production of other goods or the offering of a service.

There are several sources of capital:

Long Term - usually above 7 years

- Share Capital - the portion of a company's equity that has been obtained (or will be obtained) by trading stock to a shareholder for cash or an equivalent item of capital value.

- Mortgage - a loan secured by real property through the use of a mortgage note which evidences the existence of the loan and the obligation of that realty through the granting of a mortgage which secures the loan

- Retained Profit - the portion of net income which is retained by the corporation rather than distributed to its owners as dividends

- Venture Capital - financial capital provided to early-stage, high-potential, high risk, growth startup companies

- Project Finance - the long term financing of infrastructure and industrial projects based upon the projected cash flows of the project rather than the balance sheets of the project sponsors. Usually, a project financing structure involves a number of equity investors, known as sponsors, as well as a syndicate of banks or other lending institutions that provide loans to the operation

- Medium Term - usually between 2 and 7 years

- Term Loans

- Leasing - a process by which a firm can obtain the use of a certain fixed assets for which it must pay a series of contractual, periodic, tax deductible payments

- Short Term - usually under 2 years

- Bank Overdraft - occurs when money is withdrawn from a bank account and the available balance goes below zero. If there is a prior agreement with the account provider for an overdraft, and the amount overdrawn is within the authorized overdraft limit, then interest is normally charged at the agreed rate. If the negative balance exceeds the agreed terms, then additional fees may be charged and higher interest rates may apply

- Trade Credit

- Deferred Expenses - an asset used to enable cash paid out to a counterpart for goods or services to be received in a later accounting period

- Factoring - a financial transaction whereby a business sells its accounts receivable (i.e., invoices) to a third party (called a factor) at a discount.

But the most popular among Russian companies are:

Eurobondsissue (term>1y).Еврооблига́ция — облигация, выпущенная в валюте, являющейся иностранной для эмитента, размещаемая с помощью международного синдиката андеррайтеров среди зарубежных инвесторов, для которых данная валюта также является иностранной.

Заёмщиками, выпускающими еврооблигации, могут выступать правительства, корпорации, международные организации, заинтересованные в получении денежных средств на длительный срок — от 1 года до 40 лет (в основном, от 3 до 30 лет). Еврооблигации размещаются инвестиционными банками, основными их покупателями являются институциональные инвесторы — страховые и пенсионные фонды, инвестиционные компании.

сумме без удержания налога у источника доходов в отличие от обычных облигаций.

IPO via foreign bank

is the first sale of stock by a company to the public. It can be used by either small or large companies to raise expansion capital and become publicly traded enterprises. Many companies that undertake an IPO also request the assistance of an investment banking firm acting in the capacity of an underwriter to help them correctly assess the value of their shares, that is, the share price.

IPO включает в себя следующие этапы:

• Предварительный этап — на данном этапе эмитент критически анализирует своё финансово-хозяйственное положение, организационную структуру и структуру активов, информационную (в том числе, финансовую) прозрачность, практику корпоративного управления etc

· Подготовительный этап

- Подбирается команда участников IPO

- Принимаются формальные решения органами эмитента, соблюдаются формальные процедуры

- Создается Инвестиционный меморандум — документ, содержащий информацию, необходимую инвесторам для принятия решения

- Запускается рекламная кампания

· Основной этап — во время основного этапа происходит собственно сбор заявок на приобретение предлагаемых ценных бумаг, прайсинг — определение цены (если она не была заранее определена), удовлетворение заявок (аллокация) и подведение итогов публичного размещения (обращения).

· Завершающий этап (aftermarket) — начало обращения ценных бумаг и, в свете него, окончательная оценка успешности состоявшегося IPO.

Commercial Papers (term <1y) (вексель)is an unsecured promissory note with a fixed maturity of 1 to 270 days. Commercial paper is a money-market security issued (sold) by large corporations to get money to meet short term debt obligations (for example, payroll), and is only backed by an issuing bank or corporation's promise to pay the face amount on the maturity date specified on the note. Since it is not backed by collateral, only firms with excellent credit ratings from a recognized rating agency will be able to sell their commercial paper at a reasonable price. Commercial paper is usually sold at adiscount from face value, and carries higher interest repayment rates than bonds. Typically, the longer the maturity on a note, the higher the interest rate the issuing institution must pay. Interest rates fluctuate with market conditions, but are typically lower than banks' rates

Corporate credit policy.

Accounts Receivable and actions with it.

1) calls

2) letters

3) lawsuits

4) visits

5) changes to limits of particular debtors

6) factoring + loan sale (переуступкадолгов)

7) AR and AP ratio managing

8) Bad debts

9) Collection, lawsuits (continued)

The first step is to find out what your options are.

This way you can choose the sources of corporate credit that can benefit your business the best.

- Credit cards in the business name

- Lines of credit

- Corporate loans

Corporate credit is important for any type of business. It is a way to separate business transactions from personal ones. Even small sized businesses need to have some type of corporate credit in place. The first step is to find out what your options are. This way you can choose the sources of corporate credit that can benefit your business the best.

The easiest form of corporate credit to get is credit cards in the business name. Never get those offered where you are personally liable for them. Just like with a personal credit card though, you will have to take the time to compare offers. You want those corporate credit cards that offer you a low interest rate and that don't have any annual fee associated with them. You also want a decent amount of credit to be able to access when you need it.

Lines of credit are a good type of corporate credit. They offer you a set amount of money that you can access when you need it. This is less time consuming than having to go to the bank each time you need to access money for something. It puts power in your hands so you can make important decisions because you already know you have the funding to take care of it.

It takes longer to get a loan for corporate credit than these other forms but you will have access to more funding. Corporate credit loans are often applied for to cover a particular expense. The lender is going to look at the financial records for your business. They are also going to look at the credit that you have for it and the payment history.Corporate loans always are attached to collateral as they are considered to be secured debts. Make sure you are willing to take that risk for your business. Otherwise you may want to avoid this type of credit. You would be better off to stay with the credit cards or line of credit as they aren't secured.

Advantage: Get the funding

Disadvantage: Credibility