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Types of Financing

CA Prashanth Reddy
25/05/2017 0 2

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:

  • It is basically a equity finance in new.
  • It can be viewed as a long term investment in growth-oriented small/medium firms.
  • 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.

Debt Securitisation:

'Banks will have to unload bad loans to Asset Reconstruction Companies by FY2007' read a leading business newspaper headline sometime back.

A bank selling its bad loans, this might sound strange, but it has been made possible by securitisation.

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VIJAY | 09/04/2017

Thank you very much Sir

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Anjali | 02/04/2017


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