BORROWING MONEY IS A VERY positive corporate strategy. It helps the company to increase its growth, finance seasonal slowdowns, and invest in opportunities that will ensure its future. However, while the proper financing strategy will support these objectives, the wrong financing strategy will make what otherwise would be excellent corporate programs vulnerable to failure.

Business and our global economy are very dynamic. They are constantly changing, and the rules are always being redefined. Therefore, financing strategies must also be dynamic. What was appropriate for the company six months ago may be very undesirable now. So, like most other aspects of the business, the company’s financing requires constant monitoring and revision.

Those members of the management team who are responsible for marketing, operations, human resources, and technology have no direct responsibility for the company’s relations with the financial community, although in a smaller company they may participate in this process when a major project is involved. All senior executives of public companies will be called upon to answer questions posed by stockholders and the financial community.

Every major project of the company will ultimately be affected by the existence, form, and quantity of the financing that the company secures. Budgets are expanded and people are hired because of new financing. Budgets and headcounts are reduced

The main issues affecting financing are its:

• Maturity
• Cost
• Conditions and restrictions
• Payment schedule
• Collateral

There are two classes of financing, debt and equity.

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