Financing is understood as the process of money formation or, more broadly, the process of capital formation of a firm in all its forms. Financing entrepreneurial organizations is a set of documents and methods, principles, and conditions of financial support for simple and extended reproduction. The enterprise financing sources are divided into internal (equity) and external (borrowed and attracted capital). The goal of this essay is to consider external sources of funding.
External financing provides funds from the state, financial and credit organizations, non-financial companies, and citizens. In addition, it involves the use of monetary resources of the founders of the enterprise. Such attraction of the necessary financial resources is often the most preferable since it ensures the economic independence of the enterprise and facilitates the conditions for obtaining bank loans in the future. The level of external funding should be sufficient to achieve such goals as ensuring high-quality research and providing all countries with the opportunity to benefit from research (Maher et al. 3). In a market economy, the production and economic activity of the company are impossible without the use of borrowed funds, which include: bank loans, commercial loans, i.e., borrowed funds from other organizations; funds from the issue and sale of shares and bonds of the organization; budget allocations on a refundable basis.
Attracting borrowed funds allows the company to accelerate the turnover of working capital, increase the volume of business operations performed, and reduce the volume of work in progress. However, the use of this source leads to specific problems associated with the need for subsequent servicing of assumed debt obligations. Own and borrowed financial resources go through the formation, distribution, and payments stages and their final value goes to replenish the property. In this case, the analysis of financial stability at each of these stages makes it possible to identify the conditions for strengthening or losing the economic equilibrium of the studied business combination.
Work Cited
Maher, Dermot, Aseffa, Abraham, Kay, Simon & Tufet Bayona, Marta. “External Funding To Strengthen Capacity For Research In Low-Income And Middle- Income Countries: Exigence, Excellence And Equity.” BMJ Global Health, vol. 5, pp. 1-4.