Long Term Financing Flashcards, test questions and answers
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What is Long Term Financing?
Long-term financing is a type of financing that helps businesses meet their long-term financial needs. It is typically used for investments in capital projects such as the purchase of equipment, buildings, and land. Long-term financing can also be used to finance operations and research & development activities.The primary purpose of long-term financing is to facilitate the growth and expansion of businesses by providing them with access to external capital. By using long-term debt, companies can make larger investments without having to liquidate their assets or take out short-term loans that may require frequent repayments. Additionally, long-term financing provides businesses with more control over their finances since they are able to set repayment schedules that best suit their needs. This can help reduce cash flow issues and allow businesses to concentrate on managing other aspects of their operations while still receiving necessary funds when they need them most.There are several types of long-term financing options available depending on the size, nature, and creditworthiness of a company’s business model. For instance, companies may opt for traditional bank loans or lines of credit from commercial lenders if they have established relationships with these institutions or have good credit ratings. Smaller companies may consider venture capital or private equity if they cannot obtain conventional forms of lending due to risk profiles or lack of collateral. Other alternatives include government grants, asset based lending (such as factoring), SBA programs, public offerings (IPOs), mezzanine debt funding or even crowdfunding initiatives like Kickstarter campaigns for start ups who would like an early injection of funds into their business models before beginning operations in earnest. No matter what form it takes any form of long term funding should always be looked at carefully before committing any funds; making sure all details are discussed thoroughly between lender and borrower prior to signing any agreement and that both parties understand each other’s expectations correctly so as not to encounter any surprises down the line when it comes time for repayment(s). As part owner/stakeholder in your business; you should always look out for yourself first.