A. Absorption of direct investment
That is, the enterprise adopts the absorption of the state, legal persons or individuals to invest in the absorption of investment can be in cash, in kind, industrial property rights, land use rights and other ways to contribute.
1. Advantages of absorbing investment:
(1) help to enhance the credibility of the enterprise;
(2) conducive to the formation of production capacity as soon as possible;
(3) conducive to reducing financial risks.
2. Disadvantages of absorbing investment:
(1) Higher cost of capital;
(2) Easily disperses the control of the enterprise.
2. Issuance of common stock
1. Advantages of common stock financing:
(1) no fixed interest burden;
(2) no fixed maturity date, do not have to pay back;
(3) small risk of financing;
(4) can increase the credibility of the company;
(5) fewer restrictions on financing.
2. Disadvantages of common stock financing:
(1) Higher cost of capital;
(2) Easily disperses control;
(3) Sharing by new shareholders of the surplus accumulated by the company before the issuance of new shares will reduce the net earnings per share of common stock, which may cause a decline in the price of the stock.
Third, the issuance of preferred shares
1. Advantages of using preferred shares to raise funds:
(1) There is no fixed maturity date, no need to repay the principal;
(2) Dividend payment is both fixed and flexible;
(3) It is conducive to enhancing the credibility of the company.
2. Disadvantages of using preferred stock financing:
(1) high financing costs;
(2) many financing restrictions;
(3) heavy financial burden.
Four, the issuance of bonds
1. Advantages of bond financing:
(1) lower cost of capital - lower than the cost of stock financing;
(2) to ensure control;
(3) can play a role in financial leverage - - when the company's earnings are good. -When the company's earnings are good, bondholders only receive a fixed interest rate, while more earnings can be distributed to shareholders.
2. Disadvantages of bond financing:
(1)High risk of financing - there is a fixed maturity date and regular interest payments;
(2)Many restrictions - the restrictions are much stricter than the issuance of preferred shares and short-term debt ;
(3) Limited funding - when a company's debt ratio exceeds a certain level, the cost of funding rises rapidly, and sometimes it cannot be issued.
V. Issuance of Convertible Bonds
That is, during the validity period of the bonds, only the interest is paid, and on the maturity date of the bonds or at a certain time, the bondholders have the right to choose to convert the bonds into common shares of the company at a specified price. If the option is not exercised, the company cashes in the principal amount of the bond on the maturity date.
1. Advantages of convertible bond financing:
(1) Lower cost of repayment than ordinary bonds, lower cost of fundraising; (2) more flexible, easy to issue, easy to raise funds; (3) conducive to stabilize the share price;
(4) Compared with the issuance of new shares, reduce the dilution of the equity expansion of the earnings per share and the company's equity; (5) Reduce the financing of the Conflict of interest. 2. Disadvantages of convertible bond financing:
(1) Compared with the issuance of ordinary bonds, the share capital may be diluted, while the maturity of the interest repayment stream is uncertain;
(2) In a bull market, the issuance of shares for financing is more direct than the issuance of convertible bonds;
(3) In a bear market, if the convertible bonds can not be converted to force the conversion of shares, the company's debt repayment pressure will be relatively large;
(4) In a bear market, if the convertible bonds can not force the conversion of shares, the company's debt repayment pressure will be relatively large;
(5) reduce conflicts of interests in the financing. p>(4) Relative to the issuance of ordinary bonds, may make the total equity of the company's enterprises to expand, diluted earnings per share.
VI. Loans from financial institutions
1. Advantages of loans from financial institutions to raise funds: (1) fast fund-raising;
(2) low cost of funding - on the current situation in our country, compared with the issuance of bonds;
(3) borrowing flexibility - good. -Can directly negotiate with the bank to determine the time, quantity and interest of the loan. 2. The disadvantages of financing loans from financial institutions:
(1) high financial risk - must be regular repayment of principal and interest, in the case of unfavorable business risks; (2) many restrictions - such as regular delivery of the relevant reports, are not allowed to change the use of borrowed funds.
(3) Limited amount of financing - banks are generally reluctant to lend large amounts of long-term loans. VII. Venture Capital Market Financing
1. Advantages of Venture Capital Market Financing:
(1) An important financing method for the start-up stage of high-tech enterprises;
(2) Favorable to the cultivation of small- and medium-sized high-tech enterprises, and the promotion of China's high-tech industry; (3) Favorable to the fusion of systematic innovation, financial innovation, and technological innovation
(4) Supportive of small- and medium-sized high-tech enterprises, and the promotion of China's high-tech industry; (5) Favorable to the integration of systematic innovation, financial innovation, and technological innovation
(). (4) support small and medium-sized science and technology enterprises to change the internal governance structure towards demutualization and standardization.
(5) To give great impetus to the industrialization of scientific and technological achievements, and to promote the diffusion of technology and the development of professional division of labor. 2. Disadvantages of venture capital market financing:
(1)Venture capital market has high-risk, high-growth characteristics, and its input capital has significant cyclical liquidity characteristics;
(2)Venture capitalists or venture capital funds are mostly involved in the management of the enterprise or the implementation of direct supervision, the shareholders of the enterprise's influence on the enterprise is very large;
(3)High risk
(3) High risk -- mainly reflected in the technology risk, information risk, market risk, management risk, etc.. VIII, financial leasing
1. Advantages of financial leasing financing:
(1)Fast financing - leasing and equipment acquisition at the same time;
(2)Fewer restrictive clauses - compared with bonds and long-term loans ;
(3) Less risk of equipment obsolescence -- lease term is 75% of the asset's useful life; (4) Less financial risk -- rentals are spread over the entire lease term;
(5) Lighter tax burden 2. Disadvantages of finance lease financing:
Higher cost of capital -- rent is much higher than the interest borne by bank borrowing or bond issuance; IX. Commercial credit financing
That is, the use of commercial credit such as purchasing goods on credit, advance receipts, commercial bills of exchange and other commercial credit for financing. 1. Advantages of commercial credit financing: (1) financing convenience; (2) low financing costs; (3) fewer restrictions.
2. Disadvantages of commercial credit financing:
The term of commercial credit is generally shorter, and if the enterprise obtains cash discounts, the time will be even shorter, and if the cash discounts are given up, it will have to pay a higher cost of funds.