FINANCING INSTRUMENTS

Accelerate your business with these expert tips on "Financing instruments". Analyse and discover this TIP!

Find out which financing instruments for SMEs and entrepreneurs help to cover liquidity needs.

Accessing financial sources is both a key to success and one of the most difficult challenges to overcome. The first step is to know what options we have. Then it is time to choose the instrument that best suits us at each stage of our project. Before securing financing, it is important to study which formula best fits the project strategy.

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Glossary of financing instruments

The main sources of funding are explained below, in an updated glossary and in alphabetical order.

Self-financing or internal corporate financing

Self-financing refers to financial resources that are generated by the company itself. What are they?

• Retained earnings
• Depreciation

BUSINESS ANGEL (+)

A angel investor A business angel is a professional investor, who provides funding, expertise and contacts to new entrepreneurs. They invest capital from their personal wealth in early stage startups or emerging companies. They usually occupy a mentor roleThe startup is a close relationship with the startup, in exchange for an equity stake and with the objective of a future profit.

Visit here the Ranking of the Top 100 Business Angels prepared by mentorDay. If you want to be a Business Angel and invest in startups, find out how it works here. Mentor COinvierte (+)

Capitalisation of unemployment

This measure aims to encourage entrepreneurship or self-employment. The capitalisation of the benefits to start a self-employed activity is also referred to as a one-off payment o capitalisation of unemployment. This consists of advancing a person's outstanding unemployment benefit, provided that he or she is employed in self-employment or as a partner in a corporation.

More information in the State Public Employment Service (SEPE).

ICO Credit

The Instituto de Crédito Oficial grants this line of financing for the self-employed, companies and others who make productive investments in national territory. Its fees and interest rates are more advantageous than those offered by banks.

Check the conditions on their official website ICO

Crowdfunding (+), Crowdlending and Equity Crowdfunding (+)

Crowdfunding is "the practice of financing a project through monetary contributions from a large number of people". Crowdfunding expert file: Crowdfunding Universe

How does the Equity Crowdfunding? This new source of funding is gaining importance as it is a way to spread the risk, but also to make the capital available to many partners.

In this case, a stake in the company's capital is obtained with a return through:

• Benefits
• Revenue
• Actions
• Participations

Crowdlending is a lending instrument P2P (+), in which several investors participate. It has an interest rate that varies according to the start-up's rating on crowdlending platforms and its default risk. The interest rate ranges from 5 to 21%.

Factoring and Reverse Factoring

Factoring means assigning the customer receivables, such as invoices, receipts, etc. to a factor company. Short-term sales are thus converted into cash sales. The factor company collects the receivables and assumes the risk of insolvency of the financed company. On the other hand, the banks offer the reverse factoring o Confirming. In this case, the entity is responsible for the administrative management of suppliers.

Leasing

Leasing is also called financial leasing. It is a rental contract with an option to buy at the end of the contract. The purchase is usually carried out because it is usually offered at an advantageous price.

Bank loan

The bank loan is one of the most popular financing instruments. However, obtaining a startup loan from a banking institution can be complicated. It is the bank that decides whether to grant or reject the loan used.