Raising Money


Companies need money short-term to fund cash flow. They need money longer term for growth and expansion.


How could a company raise money ?
1) Bank Loan - with large sums of money it will often by a syndicate of banks to spread the risk. These typically have a variable interest rate.
Loans issued by companies can go under several names: - loan stock, industrial debenture, bond


2) Issuing Bonds - The word bond implies a fixed interest rate. If a bond is variable interest rate it is called a Floating Rate Note


3) Selling shares - The first time is called a "new issue". After that it is called a "rights issue". In Europe, existing shareholders must be approached first). Shareholders look for capital gains (ie share price going up). There is no date for paying the money back and the shareholder is part owner of the company.





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