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How to get funding in a crisis

Published: Thu, 10/13/2011 - 10:24
By: admin

The unstable world economic situation has forced bankers to restrict lending. Business needs funding constant, so the problems of the banking system will automatically affect the work of enterprises.


Obtain bank loans in the crisis represents an increase in debt service. This aggravates the situation of the business. What are alternative ways to finance the company?


1. Involvement of a portfolio investor. This method is suitable for large organizations that can sell their shares on stock exchanges. In the role of portfolio investors often favor public investment and pension funds. They buy a minority stake in the company based on the dividend payment. Many portfolio investors earn on the resale of shares at a higher rate. Portfolio investor does not pretend to control the company, which is an advantage of this method of obtaining financing. Stringent requirements for the enterprise by the stock exchange and the investor is his fault.


2. Strategic investor. Private equity funds and private businessmen agreed to buy a minority stake in the company. Usually they want to have an impact on business strategy. Business owner may retain the operational management of a successful negotiation. Strategic investors are less demanding on the scale of business and the degree of publicity. They focus on the effectiveness of the business model and cash flows. Partial loss of leverage enterprise management is a serious drawback of this method of funding.


3. Interest-free loan to the Arab financial institutions operating in accordance with Shariah. This method of financing for companies operating in North Africa, the Middle East, Malaysia and other regions where the spread of Islamic banking.


4. Sale of assets with no strategic value. This is an individual business units and manufacturing facilities, which do not affect the viability of the business.


Alternative methods of financing business can avoid excessive debt burden, but involves the sale of the company. Businessman tries to keep at the same control over strategic and operational management.


Experts Farlega Investment Limited are ready to provide detailed information on fundraising during the crisis.