Sources of Finance Available to a Global Business

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In order to expand and continue to compete, companies need to spend money. In order to spend money, they need to have money. In some cases, global companies can simply redirect assets that they already own. In others, they can use credit or investments to gain the necessary financial boost. Many companies rely on a combination of these.

Incorporation

One of the quickest ways of gaining capital is by incorporating, which usually means offering shares either to the public or to a select group of viable investors. The fact that a company is "going global" will make the prospect of investment more attractive to a number of foreign investors who otherwise might not be interested. One of the detriments of incorporating is that you can feasibly lose control of the company when other people become owners.

Debenture

A debenture is an issuance of a loan between a company and a lender where the lender is generally a "smaller" entity than the company. Debentures are similar to government bonds in that they are not secured by any collateral. (Collateral is something you own that you agree to surrender to your lender should you fail to repay a debt.) Debenture is different from stock issuance in that those who acquire them are not partial owners in the company. Thus, instead of getting a guarantee of the total gains of the company, they get a guaranteed percentage of return on their investment. Debenture is good for companies because they do not lose control and because they generally require a low percentage of interest. It is sometimes dangerous because poor performance can leave a company indebted to its lenders.

Venture Capital Investment

Venture capitalists make loans to new or expanding businesses, especially established businesses that are crossing international boundaries for the first time. Their services are useful for companies because they will often offer financing in higher-risk scenarios than banks. However, they will often demand a certain percentage of ownership in the company and/or a high interest rate.

Conventional Loans

Banks and other "conventional" financial institutions frequently offer business loans to companies that are expanding into new markets. These loans generally come at a lower interest rate than what a venture capitalist firm would offer, but they usually require collateral as security. For both venture capitalist firms and conventional banks, be prepared to present a detailed business plan when seeking financing.

Government Grants

As of the writing of this article, the U.S. government does not offer grants to start a business. However, many countries do offer grants to legitimate businesses who want to expand into impoverished and low-income areas. Though such grants may not be useful for marketing and sales, they can be decisive when it comes to manufacturing and production.

References

About the Author

Ronald Kimmons has been a professional writer and translator since 2006, with writings appearing in publications such as "Chinese Literature Today." He studied at Brigham Young University as an undergraduate, getting a Bachelor of Arts in English and a Bachelor of Arts in Chinese.

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