Long - Term Financing
Loans from Government Agencies
Government Grants: A government grant can
provide much needed boost to working capital
and an opportunity for business growth.
Grants are generally limited to certain types of
organizations (for example, for organizations
engaged in cultural development) and other
stringent criteria attached (for example, that
the grant will fund an activity that will benefit
the local community or employ many people).
Grants are not substitute loans.
Government loans: these usually take two
forms: either the government loans the
money directly via a publicly –owned bank) for
example, the Caribbean development bank) or
indirectly through a regional business loans
fund. There will be stringent criteria attached.
Government equity investments: Many of the
same regional funds which provide loans to
businesses can also offer capital injections via
equity instalments where the fund purchases
an ownership stake in the company rather
than lending it money.
Private Long –term Financing
Mortgages: are special types of long term
finance for buying property, where monthly
payments are spread over a number of years
and the property acts as collateral against the
loan until it is repaid.
Debentures: These loans are generally
repayable on a fixed date. The cost of this
borrowing is the payment of a fixed rate of
interest.
Shares (Equity Capital) – It involves giving up
part of the ownership of the business to
others and giving them a share in the business
and a say in how it is run.
Insurance Companies – provide long term
loans to businesses using some of the fund
they accrue in order to meet claims from their
customers.
Unit Trusts – Collect money from small
investors and use the pool of money they
collected to buy shares, bonds, property or
cash assets in other investments. This includes
providing interest –bearing loans to
businesses.
Capital Investment – Funds invested in an
enterprise to further its business objectives.
Such inputs may, for example, be provided to
assist the company’s acquisition of capital
assets such as manufacturing machines or
plants that are expected to make it more
effective over a number of years. This type of
long term finance for business is available
from a wide number of sources including
equity investors, banks, and other financial
institutions.