In a narrow sense, financing is the behavior and process of raising funds for an enterprise. That is to say, the company adopts certain methods and channels to raise funds from the company's investors and creditors through scientific predictions and decisions based on its own production and operation status, capital ownership status, and the needs of the company's future business development. Organize the supply of funds to ensure the company's normal production needs and financial management activities required for operation and management activities.

Methods of financing

Common forms

Bank loans

Banks are the main financing channel for enterprises. According to the nature of funds, they are divided into three categories: working capital loans, fixed asset loans and special loans. Special loans usually have specific purposes, and their loan interest rates are generally more favorable. The loans are divided into credit loans, guaranteed loans and bill discounts.

Stock financing

Stocks are permanent, have no expiration date, do not need to be returned, and have no pressure to repay principal and interest, so financing risks are relatively small.

The stock market can promote enterprises to transform their operating mechanisms and truly become legal entities and market competition entities that operate independently, are responsible for their own profits and losses, self-development, and self-discipline. At the same time, the stock market provides a broad stage for asset restructuring, optimizing corporate organizational structures, and improving corporate integration capabilities.

Bond Financing

Enterprise bonds, also known as corporate bonds, are securities issued by enterprises in accordance with legal procedures and agree to repay principal and interest within a certain period of time. They represent the bond-issuing enterprise and There is a creditor-debt relationship between investors. Bond holders do not participate in the operation and management of the enterprise, but have the right to recover the agreed principal and interest on schedule.

When an enterprise is bankrupt and liquidated, creditors have priority in claiming the remaining property of the enterprise before shareholders. Corporate bonds, like stocks, are securities and can be freely transferred.

Financial leasing

Financial leasing means that the lessor purchases the leased items from the supplier based on the lessee’s selection of suppliers and leased items and provides them to the lessee for use. A financing method in which the party pays the rent in installments within the period specified in the contract or contract.

Pawn Financing

Pawn is a financing method that uses physical objects as collateral and obtains temporary loans in the form of transfer of physical property ownership. Compared with bank loans, pawn loans have high costs and small loan sizes, but pawns also have advantages that bank loans cannot compare with.

First of all, compared with banks’ strict requirements on borrowers’ credit conditions, pawn shops have almost zero credit requirements on customers. Pawn shops only focus on whether the pawned items are genuine. Moreover, generally commercial banks only mortgage real estate, while pawn shops can pledge both movable and real estate.

Secondly, the starting point for pawning items at a pawn shop is low, and items worth a thousand yuan or a hundred yuan can be pawned. Contrary to banks, pawn shops focus more on serving individual customers and small and medium-sized enterprises.

Thirdly, compared with bank loan procedures, which are complicated and have long approval cycles, pawn loan procedures are very simple, and most of them can be obtained immediately. Even real estate mortgages are much more convenient than banks.

Fourth, when a customer borrows money from a bank, the purpose of the loan cannot exceed the scope specified by the bank. Pawn shops, on the other hand, do not ask about the purpose of the loan, and the money can be used very freely. Repeatedly, the capital utilization rate has been greatly improved.