Corporate finance companies in India
Corporate finance companies have two primary avenues to raise funds: debt and equity funding. Equity funding is generated by selling shares of the company and reinvesting the same amount. On the other hand, Funding through debt happens when a company borrows money. And agrees to pay it back to the lender at a later date. The debt capital is further divided into 2 major parts. i.e., Unsecured funding and Secured funding.
What is Corporate finance?
Corporate finance plays a crucial role in the financial management of companies in India. It is the area of finance, deals with raising the finances for corporate companies. Also, it assists in the capital creation & development of the corporation. Corporate finance manages financial decisions that affect operations like Capital Budgeting, Capital Raising, Investment Decisions, etc. Understanding the fundamentals of corporate finance is essential for companies to make informed financial decisions and achieve their goals.
Investment Banking Instruments
Sr. no | Secured Funding | Unsecured Funding |
1 | Loan Against Property | CGTMSE (Government-backed scheme) |
2 | Working Capital Finance | Unsecured Business Loan |
3 | Machinery Loan | Unsecured Working Capital |
4 | Builder Finance | Bill/Invoice Discounting |
5 | Lease Rental Discounting | Factoring |
6 | Debt Syndications | LC Discounting |
7 | Foreign Currency Funding | Trade Finance |
8 | Sugar Pledge Loan | Bank Guarantee |
9 | Project Finance |
Secured Funding
Secured funding is a type of loan where the borrower has to keep collateral of assets or security against the loan. The borrower here does not have personal liability for the loan. The period of the loan offered in secured is high with a low rate of interest. In case of default, the lender has the right to put the asset or security pledged on auction. So, they can recover the amount from it.
As the name suggests, a loan against property is the most secure type of loan for lending institutions. It is the most easily available one for borrowers in normal circumstances. Thus, generally, it is a long-term loan that needs collateral security against loans.
Working capital is the difference between the company’s current assets and its current liability. One can avail of a loan against working capital. Thus, it will help in short-term operations like paying dues or expenses, utility bills, etc. Hence, Working Capital Loan allows one to run their operations smoothly and efficiently. Working capital is available in both secured and unsecured ways.
All manufacturing companies require machinery to manufacture the products. That may have huge costs. Thus, in such a case, a machinery loan is something that acts as a savior for your business. The machinery loan is available in both secured and unsecured ways which are taken for purchasing new machinery.
It is a loan to the builders or developers. So builder finance is given for constructing or developing residential or commercial property. Being long-term finance, it comes under secured funding. So, the collateral of such a loan will be the land against the property being acquired or developed. Generally, lenders prefer those builders who have been in this construction field for many years and have a good CIBIL rating.
LRD Loan facilitated against the rental receipts of the borrower. It has been derived from lease rent contracts from the clients. Thus, the loan is provided to the lesser based on the discounted value of the rentals and the value of the property.
It occurs when a borrower requires an amount that is too large for a single lender to provide. Hence there is a group of lenders. The lenders in debt syndication share the risk only exposed to their portion of the loan.
It is when the borrower wants to fund across borders. That is a foreign country. Hence the borrower as well as the lender deals in foreign currency only.
The time gap between the production and sales of sugar is high. Hence, they can face a crunch in working capital and sugar industries can get loans against sugar.
Project finance means a loan obtained for fulfilling the finances of the new project. The new project can be used for expansion, reconstruction, etc. Here, the project itself is kept as collateral. So, the loan amount has to be paid after the completion of the project. Or once the borrower starts generating revenue.
Unsecured Funding
As the name implies, Unsecured debt products are loans that do not require collateral. So, the loan is provided based on the CIBIL score. This type of loan is taken by businessmen to overcome their short-term inconsistency in the business. That includes the payment to the supplier, shortage of working capital, unsettled invoices, and many more. The Rate of Interest is comparatively high because of the absence of collateral.
Credit Guarantee Fund Trust for Micro and Small Enterprises is an unsecured loan. It is for micro and small enterprises to help small businesses grow in a competitive market. So, it assists entrepreneurs to build their businesses and availing of collateral-free loans up to 5 Cr easily and conveniently.
Trade finance makes it possible and easier for importers and exporters to transact business through trade. Thus, it signifies financing for trade. Trade finance concerns both domestic and international trade transactions. So, this is one of the suitable financial instruments we can use while dealing with an international customer for minimizing financial risk.
Discounting of the bill can be defined as the advance selling of a bill or invoice to an intermediary before it is due to be paid about certain criteria. A major aspect of bill discounting is that it will help in resolving the crunch of working capital.
In this, the seller sells its accounts receivable to a third party called ‘factor’ at a discount. There are three parties involved in factoring facility: a seller, a buyer, and a factoring company. So, in simple words, it is selling unpaid invoices for the requirement of instant cash.
A letter of Credit/Line of Credit is the guarantee by the bank to purchase the bills of the exporter and in return make him the payment. So, the Banks, NBFCs, or Financial Institutions provide LC Discounting.
Importance of Corporate Finance:
1. Raising Capital:
Corporate finance means raising the finances of the existing company by debt or equity. It is required for running the business efficiently. The need for funds can be for making expansions and diversification in business, payment dues, etc.
2. Research and Development:
Finance is a crucial aspect of the business. It is also required for undertaking research and development. Thus, enhancing the functioning of a business organization.
3. Smooth Running of Business:
For a business to run effectively, there should be proper, legal, and other compliance. Like paying dues and taxes on time. So, it is again developed by corporate finance.
Corporate Finance Process
1. Interaction with the client:
The foremost step in this process is interaction with clients. And also knowing about their company’s financial condition. That is the requirement for finance, product/instrument for raising finances, etc. The process starts with a discussion of clients’ requirements and expectations. It ends after disbursing the loans. So, we arrange the best possible product and provide an easy process throughout. Also, our team of experts guides the applicant in every stage.
2. SWOT analysis of the company:
It is important to know the strengths and weaknesses of the company. It will help us to draw the analysis of raising finances. Not only strengths and weaknesses but overall analysis of the company is essential to exactly understand which funding to go for.
3. Inspecting the market options:
After understanding the overall aspects of the company, we check the conventional and non-conventional factors. Thus we suggest the best suitable option for them. We discuss the overall process in-depth with clients and make them understand it thoroughly. Here, we check the eligibility of the client. And hence, the overall documentation procedure is undertaken.
4. Approval of Finances:
We arrange meetings with lending institutions and take their approval. That ultimately starts the loan procedure from sanctioning the loan. Our team settles these arrangements. This finally leads to easy disbursement of funds. Our journey doesn’t end here. We make sure that the suggested product suits the client’s interest. Thus the client should be in an adequate position to return it at a specified period.
Terkar Capital: The corporate finance company
Corporate finance companies play a vital role in offering valuable financial guidance and securing funds in India. Also, they effectively handle financial choices that significantly influence business operations. Corporate funds can be raised through debt financing or equity financing. However, when it comes to Terkar Capital, we raise funds more through debt financing.
We are a financial firm that provides both secured and unsecured business loans. Our timely execution and professional services make us stand apart. We understand borrowers’ needs, strengths, and weaknesses. So, If you are looking for a corporate finance company, here we are!!
Learn more about equity financing here.
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“Your corporate finance blog is a breath of fresh air in the finance industry! The insightful articles and thought-provoking analysis provide a deeper understanding of the intricacies of corporate finance. I appreciate how you tackle complex concepts with clarity and present practical applications that resonate with both finance professionals and enthusiasts.
Thank you so much Mr. Mankirat, for your kind words!!
We are delighted to hear that our corporate finance blog has made a positive impact.
It’s our goal to bring a refreshing perspective to the finance industry, offering insightful articles and thought-provoking analysis that deepen the understanding of finance intricacies.
Best Regards,
Team Terkar Capital.