Other sources of finance include:Financing the ebbs and flows of the company's business and ensuring that finance is available to support any expansion is vital to the survival of any company.

To determine what finance is needed requires first, the development of an Operating Budget, covering Forecasting Cash Flows, sales, production, purchases and operating expense budget, and then a Financial Budget needs to be developed comprising a capital budget and a cash budget. The capital budget includes acquiring new facilities, replacing ageing or obsolete equipment and the capital required in any longer-term projects. The cash budget covers the sources and uses of cash and is based on the data from the operating and capital budgets. This will then show the financing needed in the short and long term. Next the company has to develop a strategy as to the sources to raise the finance required internally and/or externally as the figure shows.

Financing the Company

Source: J&W Associates Copyright© 2011

The first task in any financing programme should be to minimise the external financing required by raising as much finance internally as possible by:

• extracting liquidity from working capital with a Total Working Capital Management programme including:
  • extending Days Payables Outstanding by using Supply Chain Financing
  • reducing Days Sales Outstanding by using Dynamic Discounting of invoices
• using Inhouse Banking to provide financing from within the Group
• Releasing Trapped Cash, and
• Concentrating Liquidity.

The second task is to raise the remaining finance needed from the markets. Either from asset backed based finance:

• receivables based finance:
  • factoring
  • invoice discounting & securitization
• other types of asset backed commercial paper programmes include:
  • project finance
  • public private partnership finance
  • leasing finance
  • real-estate finance.
  • (See Figure.)

Types of Asset-based Financing

Or from other sources of finance which include:

• loan finance
• bond finance
• equity finance
• trade finance - supplier-centric financing and buyer-centric financing.

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