Firms can raise long term financing from various sources. They can issue shares, debentures, and other long term bonds in the capital market.
Long term financing provides funds to capital deficit businesses for a period that is over 1 year. Short term financing, on the other hand, offers funds for a period that is less than 1 year. For both new businesses and established corporations, it is common that they have some kind of debt throughout their existence. Hence, raising long term finance is important for all kinds of businesses.
Long term financing can provide funds for various requirements like large capital equipment, fixed assets, expansion of business and facilities, and large scale construction projects.
Firms can also raise long term finance from borrowed capital. They may borrow such capital from institutions or individuals, a practice that includes issuing debentures. The various debentures that the company issues in order to collect long term finance include debentures to bearer, redeemable and irredeemable debentures, and hardcore debentures.
Other sources of long term financing for a business are term loans, equity capital, debentures, preference capitals, and internal accruals.
Various types of long term finance products include:
Secured and unsecured notes
Fixed deposit loans
Interest rates swaps
Interest only futures
Forward rate agreements
Option on future contracts
Last Updated on : 1st July 2013