Long term financing means financing by loan or borrowing for a term of more than one year by way of issuing equity shares, by the form of debt financing, by long term loans, leases or bonds and it is done for usually big projects financing and expansion of the company and such long term financing is generally of high amount.
External Commercial Borrowingsis a long term source of finance.
External Commercial Borrowings:
An external commercial borrowing (ECB) is an instrument used in India to facilitate Indian companies to raise money outside the country in foreign currency.
The government of India permits Indian corporates to raise money via ECB for expansion of existing capacity as well as for fresh investments.
ECBs allow corporates to borrow a large volume of funds for a relatively long term.
Thus, option 2 is the correct answer.
Short term loans are called such because of how quickly the loan needs to be paid off. In most cases, it must be paid off within six months to a year. Any loan for a longer loan term than that is considered a medium-term or long-term loan.
Commercial Paper:Commercial paper is a commonly used type of unsecured,short-term debt instrumentissued by corporations, typically used for the financing of payroll, accounts payable and inventories, and meeting other short-term liabilities.
Factoring:A factor is an intermediary agent that provides cash or financing to companies by purchasing their accounts receivables.Factoring can help companies improve their short-term cash needs by selling their receivables in return for an injection of cash from the factoring company. The practice is also known as factoring, factoring finance, and accounts receivable financing.
Line Of Credit: It is a kind of short-term loan. A line of credit is much like using a business credit card. A credit limit is set and the business is able to tap into the line of credit as needed. It makes monthly installment payments against whatever amount has been borrowed. Therefore, monthly payments due vary in accordance with how much of the line of credit has been accessed.
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External commercial borrowing (ECBs) are loans in India made by non-resident lenders in foreign currency to Indian borrowers. They are used widely in India to facilitate access to foreign money by Indian corporations and PSUs (public sector undertakings).
The sources of long-term financing include equity capital, preference capital, debentures, term loans, and retained earnings. To maintain a healthy asset-liability management (ALM) position, a company's management should ensure a mix of short-term and long-term financing sources.
Stock. The most common type of long-term financing used by corporation is by issuing stock. Stock has two types – Common and Preferred, both types have advantages and disadvantages.
Equity financing involves selling a portion of the business's ownership to investors in exchange for capital. It is a long-term financing approach commonly used by startups and high-growth companies. By selling shares, businesses can raise funds without incurring debt.
This loan comes with significantly higher repayment tenures, and you can repay it over an extended period of time, usually ranging from 3 years to 30 years. Examples of long-term loans include Home Loans, Car Loans, Two-Wheeler Loans, Personal Loans, Small Business Loans, to name a few.
Investments for retirement are considered to be a long-term financial strategy. Long-term financial strategies are intended to last for more than 1-year.
Factoring is an important source of capital for businesses – especially startups, or businesses that operate in industries with long receivable cycles, since it involves no collateral, no risk and ensures short-term liquidity.
Trade credit is probably the easiest and most important source of short-term finance available to businesses. Trade credit means many things but the simplest definition is an arrangement to buy goods and/or services on account without making immediate cash or cheque payments.
A source or sources of finance, refer to where a business gets money from to fund their business activities. A business can gain finance from either internal or external sources.
Larger expenses are affordable: Long-term financing helps businesses to afford capital expenditures such as buildings and equipment. They can fulfill the long-term capital goal of the business. If more capital expenditure and assets are available, then it can support the growth and expansion of the business.
Long Term Debt (LTD) is any amount of outstanding debt a company holds that has a maturity of 12 months or longer. It is classified as a non-current liability on the company's balance sheet.
Long-term debt is used to finance long-term (capital) expenditures. The initial maturities of long-term debt typically range between 5 and 20 years. Three important forms of long-term debt are term loans, bonds, and mortgage loans.
Loans for machinery, equipment, or land are examples of long-term liabilities, whereas rent, for example, is a short-term liability that must be paid within the year. A company's long-term debt can be compared to other economic measures to analyze its debt structure and financial leverage.
Because 96 months is typically the longest loan term you'll find — and some places only go up to 84-month car loans — your main choice comes down to whether your circ*mstances truly merit an eight-year-long loan, or if you can make an alternative arrangement that allows for a shorter loan.
You'll make a fixed number of monthly payments at the same time each month until your loan is cleared. You can choose to pay it off early, but watch out for any early repayment charges.
Trade credit is probably the easiest and most important source of short-term finance available to businesses. Trade credit means many things but the simplest definition is an arrangement to buy goods and/or services on account without making immediate cash or cheque payments.
What is venture capital? Venture capital provides long-term, committed share capital, to help unquoted companies grow and succeed. If an entrepreneur is looking to start-up, expand, buy-into a business, buy-out a business in which he works, turnaround or revitalise a company, venture capital could help do this.
Long Term Debt (LTD) is any amount of outstanding debt a company holds that has a maturity of 12 months or longer. It is classified as a non-current liability on the company's balance sheet.
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