Long Term Finance

Topics: Stock, Corporation, Limited company Pages: 4 (1375 words) Published: July 11, 2013
Long Term Finance
What is long term finance? Long term finance can be defined as the funding obtained for a time frame which is exceeding 12 months in duration. It usually has a term of at least 12 months up to 25 years. Long term finance can be seen when a business uses long term finance method to borrow funds from the bank and it has to pay back the loan over more than 12 months period. Merchant back offers long term finance generally. Long term finance is used for investments and projects that have an indefinite or long term date such as more than 12 months. Why the long term finance is being used widely nowadays? Reason for usage of long term finance includes expansion into new markets, purchases of assets such as machinery, land and buildings and business growth through the acquisition of other business of properties. There are many types of long term finance. The first type is the shares. What is share? Basically, a share is a part ownership of a company or a firm. Companies that set up as private limited companies or public limited companies are related to shares. There are many small firms who decide to set themselves up as private limited companies. To expand business, more shares should be issued. However, there are limitations on who they can sell shares to. For example, any share issue has to have the full backing of the existing shareholders. Private limited companies are different. Why they are different? This is because they sell shares to the general public. What does this means? It means anyone can buy the shares in the business. Some firms started out as a private limited company. As time passes by, they have expanded throughout the time. Then they will come to a period where they cannot even issue any more shares to their friends and family. To keep on expanding, they will eventually need more funds to do so. This will slowly lead them to becoming a public limited company. When this occurs, we...
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