Capital mobilization forms help businesses have the opportunity to expand markets and increase production to earn higher profits. With the article below, let Viindoo software learn about the most popular capital mobilization forms.
Below is a summary table, comparing the advantages and disadvantages of popular capital mobilization forms:
| | Advantages | Disadvantages |
| Capital from Bank Credit | The government has many policies to help small and medium enterprises access this capital. Large enterprises have many assets to mortgage, which is extended by the Bank for payment,... | Passively the loan amount is based on the Bank's decision. Enterprises are monitored by the Bank on the use of loan capital, paying principal and interest on time as prescribed, etc. |
| Capital from Commercial Credit | Quick application procedures, timely response to temporary loan needs to help businesses sell goods. | As an unsecured credit, the risk is high. The scope is narrow, occurring only between companies that know each other. The scale of commercial credit is limited in the capital goods capacity. |
| Capital issue | Increase long-term capital, and equity, and reduce the debt ratio. High yield, not limited by capital. Acquire resources of experience, market & technology from new shareholders. | Right to control is divided, which can cause internal conflicts. The cost of use is higher than that of bonds and preferred stock. |
| Bonds issue | Low yield, directly deducted from income, no need to divide control, and high profits for bondholders. Issuing costs that are lower than common shares or preferred shares | The debt ratio of the business increases. It is imperative to pay the interest on time, without delaying the principal part. |
| Capital from undivided profits | Not being dependent on external capital, increasing financial autonomy. Business capital increases, creating opportunities for growth. Building better credit relationships with banks, individuals and credit institutions. | The failure to take profits out to distribute dividends to shareholders causes the company's share price on the market to decrease. |
Initial capital contribution
When establishing an enterprise, the owners contribute a certain amount of capital. This is called the initial capital contribution of the business. Depending on the type of business, the nature and form of capital contribution will vary. Example:
- State-owned enterprise: The initial capital of this company is capital invested by the State.
- Joint-stock company: The initial capital is calculated by the total value of the par value of the shares registered to buy and this data has been recorded in the content of the Enterprise Charter.
- Limited Company and Partnership Company: The initial contribution of these enterprises will be calculated based on the total value of capital that the members commit to contribute.
Initial capital contribution
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Capital from bank credit
Bank credit is widely used and is considered one of the best forms of capital mobilization for businesses today. This method only works for asset transactions between borrowers (eg: organizations, individuals, enterprises) and the Bank.
When performing this transaction, the Bank will be responsible for transferring the property to the borrower for a certain period of time. The Borrower is responsible for returning both principal and interest to the Bank upon maturity as agreed upon.
Currently, there are many forms of bank credit such as:
- By credit term: Short-term credit, long-term credit, medium-term credit,...
- By credit object: Working capital credit, fixed capital credit,...
- According to the purpose of capital use: Production, circulation of goods,...
Capital from Bank credit
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Capital from Trade Credit
When businesses make direct purchases and sales of goods without immediate payment, this form of credit will be used. Common types of trade credit include
- Import credit: This type of credit is provided by the importer to the exporter to ensure a smooth import process.
- Export Credit: This type of credit is provided by the exporter to the importer to promote the export of goods.
- Broker Credit: This type of credit is indirectly granted by commercial banks to both importers and exporters through a broker.
Capital from Commercial Credit
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Capital issue
Capital issue is one of the capital mobilization forms that many medium to large joint-stock companies use. Based on the content of Clause 2, Article 4 of the Vietnam Securities Law 2019, the concept of shares is considered a form of securities. In which, the owners of shares will have legal rights and interests corresponding to the value of the share capital that they have spent money to buy.
If an enterprise wants to capital issue, it must meet the following conditions:
- The enterprise having business activities in the consecutive year preceding the year of registration must be profitable and not incur accumulated losses up to the year of registration. registration of offering.
- Enterprises are required to receive the approval of the General Meeting of Shareholders on issues, including The plan to issue shares and the plan to use the collected capital.
- Enterprises must have a closed charter capital of 10 billion or more right at the time they want to issue and offer shares to the market. This data is taken from the actual value recorded in the accounting books of the enterprise.
- The company selling shares on the stock market must commit to trading on the market within one year, after the sale ends, it must be approved by the General Meeting of Shareholders.
Capital issue
Bonds issue
Bonds are also one of the capital mobilization forms that bring many benefits to businesses today. This is a type of securities with a term of 1 year or more that is issued by enterprises to investors. Enterprises must commit to be responsible for repaying principal and interest, and performing other obligations (if any) to investors.
Types of enterprises permitted to issue bonds include: Limited liability companies and joint stock companies established and operating under Vietnamese law.
Bonds issue
Capital from undivided profits
Capital from undivided profits (or retained earnings) is a part of profits that organizations and enterprises use to reinvest:
- Reinvestment activities of enterprises State-owned enterprises both depend on the profitability of enterprises and depend on the State's reinvestment policy.
- When joint-stock companies use part of profits to reinvest, shareholders will be entitled to own an increased share of capital in the company.
In addition to the capital mobilization forms mentioned above, enterprises can now also mobilize capital from sources such as individuals, organizations, financial leasing; Borrowing investment funds from individuals, organizations, etc.
Loans from undivided profits
Thus, the above article has compared and introduced in detail about the popular capital mobilization forms today. Viindoo hopes that after this article, your business will always ensure a solid financial source for a more successful business.
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