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Types of Financing

C
CA Prashanth Reddy
27/09/2017 0 0

Types of Financing 

Bridge Financing

  •  Bridge finance refers to loans taken by a company normally from commercial banks for a short   period because of pending disbursement of loans sanctioned by financial institutions.
  • The bridge loans are repaid/ adjusted out of the term loans as and when disbursed by the concerned institutions.
  •  Bridge loans are normally secured by hypothecating movable assets, personal guarantees and   demand promissory notes. Generally, the rate of interest on bridge finance is higher as compared   with that on term loans.

Venture Capital Financing 

The venture capital financing refers to financing of new high risky venture promoted by qualified entrepreneurs who lack experience and funds to give shape to their ideas. 

 In broad sense, under venture capital financing venture capitalist make investment to purchase equity or debt securities from inexperienced entrepreneurs who undertake highly risky ventures with a potential of success.

   Some of the characteristics of Venture Capital Funding are:-

(i) It is basically a equity finance in new companies. 

(ii) It can be viewed as a long term investment in growth-oriented small/medium firms. 

(iii) Apart from providing funds, the investor also provides support in form of sales strategy, business networking and management expertise, enabling the growth of the entrepreneur. 

 

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