2.2. Other long term financial resources

2.2. Other long term financial resources

Companies, generally, need more resources that provides own funding; Therefore, they have to resort to foreign funding.

Other long-term financial resources are those of which the company has during a period longer than the duration of a financial year and which, once passed this time, has returned with interest.

Within the external long-term resources are the following:

Long term loans.

Companies borrow to finance institutions (banks, savings banks, cooperative credit, etc.) in order to finance. Once the loan is approved, the company can have the money immediately. This money should be returned with interest according to the conditions laid down.

Borrowing.

They are receivable (obligations, bonds, promissory notes, etc.) that emit the companies and that are purchased by individuals and other companies in Exchange for a vested interest.

These titles are called fixed-income securities because they tend to give, who possesses them, interest rates fixed in advance. Shares are equity securities, since they do not have an established performance.

When companies need a lot of money and the conditions of the loans offered by financial intermediaries are not economically acceptable, they borrow from individuals by issuing bonds and obligations. These titles (all matching and conditions) are acquired by a large number of saving individuals and companies. After a time, the company will return money more interests according to the agreed conditions. Only large companies can come to this type of financing.

The lease or leasing

It is a system of funding whereby the company incorporates some element of fixed assets in Exchange for a lease fee.

Three economic agents involved in this process:

• the client-company, you need a specific Product;
• the company that manufactures or possesses good;
• The leasing company. The leasing company is a financial institution that finances the acquisition of good and delivers it to the client-company in Exchange for a rent.

The duration of the leasing operation usually coincide with the economic life of the asset. The amount of leasing fees includes amortization of the good, the interests of productive capital, administrative costs and a risk premium if it fails the tenant company. When the rental period you can return the property to the leasing company, or either buy it according to the price set in the contract.

The main drawback of this mobility financing is the high cost. There are many, however, companies that incorporate elements of asset in this way, because it does not have to worry about looking for financial resources and can obtain tax advantages, since part of the leasing fees represent an expense for the company and the economic result will be lower, which means that you will pay less tax.

The Renting

It is a modality that consists in the rental of movable and real estate in the medium and long term. In the renting contract, the tenant undertakes to pay a monthly fixed income for a given period, and the company of renting undertakes to provide a series of services: to facilitate the use of the good during the contractual term, to proceed to the maintenance Of the good and hire a full-risk insurance.

Rental income through this method is a tax-deductible expenditure of 100% and there is no minimum lease duration. At the end of the contract, the renting company offers the tenant the option to replace the equipment or renew the contract for a new period to be determined. Unlike leasing, there is no possibility of purchase for the tenant at the end of the contract.