According to government estimates, only 4 percent of 57.7 million small business units in India have access to institutional finance, leaving many to rely on informal lenders, says an article published in Reuters in March 2015. Businesses need smooth and continuous flow of capital in order to function, expand and grow. Obtaining business loans from a bank is one of the most preferred options when it comes to fulfilling capital needs.
Types of Corporate Finance Solutions
Banks and non-banking financial companies have designed products catering to the specific capital needs of businesses. Listed below are some of them.
1. Capital Market – This service lets business houses monetise their equity investments, such as shares, mutual funds, insurance policies and debt instruments, in order to raise long-term capital. Such a funding option lets you raise loans against shares, securities, mutual funds, insurance policies, and corporate and government bonds. You can also leverage/trade in equity shares at a per-defined margin, also known as margin trade funding and IPO financing. Customised and specialized solutions for every company are also offered.
2. Corporate Finance – Corporate finance options are available to SMEs, and mid and large corporate houses. The various types of credit facilities available under this category aim to fulfil the working demand and growth capital needs of the businesses. Corporate finance includes working capital demand, term loans, SME loans, transaction facilities with bankers, line of credit, structured finance, treasury risk solutions as well as invoice discounting. You can also acquire credit under treasury risk solutions that enables you to protect your business against currency volatility.
3. Commercial Real Estate and Mortgages – Property is leveraged to borrow funds for immediate and long term financing needs. This credit facility lets business houses borrow money through customized products, such as loans against property/property loans, lease rental discounting, construction finance as well as commercial property purchase loan.
4. Project and Structured Finance – This product specifically provides financing for projects in the infrastructure, core, manufacturing, hospitality, education and healthcare sectors. Credit is offered for the project as well as for interim financial needs, for additional funding requirements beyond senior debt and equity as well as corporate loans that help companies tide over unforeseen/unplanned fund requirements by providing credit for general corporate purposes.
5. Debt Syndication – This enables companies to raise short term and long term funds through the banking sector or the broader debt market. It basically refers to loan advisory services, where the lending company coordinates all activities related to syndicating a bank loan to meet various requirements of the borrower, which might include capacity expansions, working capital requirements, refinancing of existing obligations, merger and acquisition, and leveraged buyouts.