Long-term financing options are the one which are repaid over a
period of more than a year. Someof the long-term financing options
are-
- Equity shares- these are the shares issued to the general
public. These are non-redeemable. The holder of such shares has the
right to vote, share of profits and calim over the assets of a
company.
- Preference Shares- the holder of these shares doest not have
the rights same as equity share holder. However, they get fixed
profits and at time of liquidation gets paid before the equity
shareholders.
- Venture funding- these are form of private equity funding.
These are provided by the venture capital firms to the early stage
companies that have high growth potential or has demonstrated high
growth.
- Bond and debentures- the major difference between bonds and
debentures is that, bonds are backed up by the asset of the issuer
and the debentures are not backed by any physical assets or
collateral.
- Retained earnings- The retained profits of the business are
know as reatined earnngs.
- Term Loans- it is the loan which is paind in several
installments over a long period of time. These usually last between
1-10 years. However, in some cases it may extent to many more
years.
A) Some of the factors affecting the choice of internal and
external fundings are
- Size of the business- the size of the business organisations
affects the choice of business. Usually small firms go for internal
fundings and large furms go for external funding depending on their
need.
- Nature of business organization- Usually the service oriented
sectors rely on internal funding and manufacturing concern goes for
external funding.
- Purpose- the need and purpose for funding is a major factor
that influence the choice of funding.
- Control/Ownership- usually in long-term financing ,
when the company go for external funding, they loose some control
over the company which the third party used to supervise. So if the
business is going for external funds they should critically analyse
this point.
B) Usually with small doctor's office where these are less
scopes for growth, I would choose internal fundings or manybe a
short-term bank loan because less scopes of expansion.
However, for large hospital I would choose long-term financing
as its easier to repay over a long period. The cost of growth will
be substituted with long-term financing from an external
source.