MODES OF MOBILE CAPITAL CLOTHING CORRECTLY WITH TYPES OF ENTERPRISE

by Apra Law

In the current production and business activities, the need to increase capital and expand the market is one of the urgent needs to increase the integration and competitiveness of enterprises. Depending on the business model and specific characteristics, each enterprise may have different methods of capital creation and mobilization such as initial capital contribution; undivided profits; capital from the issuance of shares… In which, a method of raising capital most commonly used by various types of businesses is to mobilize loan capital.

First, mobilize loans from individuals, credit institutions and other organizations

Mobilization of enterprise loans from credit institutions; agreements with other individuals or organizations; Borrowing from employees in the company can be understood as an activity that increases the amount of capital, which is money or increases the value of assets of the enterprise through the form of loans. Specifically, the form of lending through a credit contract will help businesses directly increase the amount of working capital of the business, this capital is financial leverage to help businesses operate more efficiently or reduce financial burden for the business.

Borrowing business from individuals, organizations, credit institutions or other organizations will have advantages when compared with other forms and these differences will have certain differences. when applied to the size of each business. Specifically, business owners are allowed to take full control of the borrowed assets. The interest that businesses have to pay on loans is considered a valid cost to deduct when calculating corporate income tax, which will partly help businesses reduce interest expenses. However, the interest rate when mobilizing loans in this case will usually be higher when compared to other forms of capital mobilization.

In addition, business loans from individuals, organizations, credit institutions or other organizations are often passive in the borrowing process because they must fully meet certain loan conditions of the lender. . The loan conditions required by the lender such as the business must meet the financial ability to repay through the analysis of financial indicators, must have a reasonable loan use purpose, and have assets. Loan guarantees and many other security measures depending on the policy of the lender and the financial position of the business. In addition, in many cases, businesses may have fully prepared relevant legal documents to prove their eligibility for loans, but in the end, the loan amount and loan term of the business all depend on the final decision. of the lender.

Second, mobilize loan capital by issuing bonds

The mobilization of loan capital through the form of bond issuance can be understood as a form of enterprise increasing its capital through the issuance of bonds – the vehicle can be considered as a debt of the issuing enterprise. with the bond purchaser for the purpose of implementing investment programs and projects of the enterprise, increasing the size of the enterprise’s working capital and restructuring the enterprise’s own debts, these principles are prescribed It is clearly stated in Article 5 of Decree No. 163/2018/ND-CP regulating the issuance of corporate bonds.

Bond issuers are organizations that need to raise capital by issuing bonds and selling them to investors with idle capital and investment needs to earn profits in the future. The reason why a partnership or a private enterprise is not allowed to issue bonds comes from the typical characteristics of these two types of businesses, which are counterparty enterprises. In particular, general partners or sole proprietorships have unlimited liability for the debts of the company. These characteristics are completely contrary to the purposes of the bond issue such as debt restructuring, so it is perfectly reasonable to only allow public shares and limited liability companies to issue bonds.

Third, mobilize loans by commercial credit

Trade credit is a credit relationship between enterprises, a relationship between an enterprise and an individual or a relationship between an enterprise and other organizations, which is done in the form of credit sales, deferred payment or installment payments. goods. By the agreed time limit, the purchasing enterprise must return both principal and interest to the selling enterprise in monetary form. From the definition of commercial credit, it can be determined that the indirect mobilization of loans through commercial credit is considered a form of increasing short-term debts or loans to serve production, promoting the circulation and consumption of goods, facilitating the expansion of partnerships between enterprises, which in many cases can be considered as indirect capital appropriation.

Therefore, all types of businesses from sole proprietorships, partnerships, limited liability companies, joint stock companies can participate in these relationships. In fact, when businesses are formed from the time they are formed to the end, this relationship is the most common and common because this relationship is built from the exchange of goods, trading and trading. business of the enterprise.

Fourth, mobilize capital through financial leasing activities.

Finance leasing is a segment of the capital market in which the capital provider acts as a lessor that undertakes to sell the asset and equipment at the request of the lessee and holds title to the asset. rental property. The party raising capital uses the leased asset and pays the rent during the term agreed in the contract. This term must account for the majority of the useful life of the asset, the total amount payable by the tenant to the lessor must be equal to or greater than the market value of the rental property at the time of signing the contract. At the end of the lease term, the lessee has the option to purchase the leased asset at a price lower than the value of the leased asset at the time of acquisition.

Financial leasing brings many benefits to both individuals and businesses. Enterprises lacking capital can choose the financial leasing solution, instead of buying with cash or buying in installments of machinery, equipment, production lines, and means of transport. Therefore, all types of businesses such as joint stock companies, limited liability companies, partnerships and private enterprises can perform this activity when required.

Above is the consulting article on “Modes of mobile capital clothing correctly with types of enterprise” of Apra Lawfirm. If you still have questions about the above issues and need to be answered, please contact the hotline for advice and support.

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