Any business entails a need for financial resources. It is therefore essential for the project leader to have a good understanding of the different forms of financing available, be able to evaluate their needs and be able to access the most appropriate sources of financing.
What is meant by financing?
By financing, we mean all the internal and external financial resources available to a business (company, self-employed or non-profit organisation) that enable it to have the means necessary to carry out its activity.
The various sources of financing are shown as liabilities on the balance sheet. Together, they form the resources available to the company and so also represent the company's debts to its creditors, classified in decreasing order of due date. Debts are, of course, to be understood here in the broadest sense of the term. Their counterpart on the assets side of the balance sheet, particularly in the form of cash, represents the company's resources.
What are the different sources of financing?
The different sources of financing can be grouped into five categories, each with specific characteristics in terms of legal, tax and accounting aspects (counterparty, type of commitment, due date, subordination, etc.), technical aspects (duration, costs, purpose, presence or absence of a cash flow, etc.) and risk.
These five categories are:
Self-financing is the financing of the company by the positive results it generates and does not redistribute.
2. Own contributions (capital)
Own contributions are the cash that the project leader brings to the company, which therefore has a debt to the leader.
Subsidies, or bonuses, are financial aids that companies can apply for, generally from Brussels Economy Employment, to reimburse part of the costs they have incurred for their development. They may include costs for recruitment, training, prospecting trips, consultancy, purchase of equipment, works, etc.
Credit represents loans granted to the company by external organisations. Credit can be a short- or long-term loan, granted by the bank, a payment term granted by a supplier, or an advance on an invoice by specialised organisations.
5. venture capital
Venture capital is the provision of capital by individual investors (often called Business Angels) and companies (public or private investment funds), with the aim of making a profit and/or supporting the development of the business. This type of financing therefore implies opening up the company's capital.
Self-financing, own contributions, subsidies and venture capital financing are part of the company's equity, while credits are debts.