Corporate Funding (Introduction to types and methods of funding)

Corporate funding is a key element to companies of all kinds and sizes, and therefore it’s a concern to every leadership. And with the varying types of available funding, it’s necessary to choose the most appropriate formula that fits the needs of each company. With funds and calculated material sourcing, a company can enhance its operations and expand its scope. 

Corporate funding 

Corporate funding is an economic term referring to the management concerned within the charge of financial affairs such as providing the company with funds to complete their flowchart, as well as defining the strategies focusing on maximizing capital and investment decisions. 

Funding primarily focuses on multiplying the contributions of partners and shareholders by relying on long and short-term financial planning. Another fundamental factor is a keenness to achieve and implement strategies. 

Funding activities vary from capital investment decisions to banking services with the aim of money investment. Specialized funding corporate departments and institutions usually oversee the performance and application of financial plans within their management umbrella. 

Types of corporate funding 

Personal and Family funding:

It’s widely used in the case of startups and small and micro enterprises, and often depends on the incoming and savings of its founder, as well as contributions from family members and friends. Compared with other funding types where the investment value may reach millions of dollars, personal and family funding usually involves a small amount of money ranging from 23$k to 100$k in very rare cases and it’s mainly used in the early stages of a project. 

Crowdfunding: 

This method gained popularity in emerging projects through platforms such as Kickstarter and Indiegogo, where the project owner attractively presents his/her idea and sets the goals of his project and the required amount of money to achieve it. This way, individuals and financiers throughout the world can support the project with different amounts of money. Each level of funding comes with different benefits, starting with a simple “Thank you” letter or a free copy of the final product, and even owning shares in the company when the amount of investment is sufficient for that. 

Angel investing: 

An “Angel Investor” usually consists of a rich individual or a group of individuals who risk their own money on high-risk projects in which they have faith in the company’s business vision, or great confidence in its founders.   

The main role of an angel investor is to fill the funding gap between the usually limited personal and family funding. And for accepting the risk and investing with thousands if not millions of dollars, an angel investor has the right of ownership to the company’s shares.  

Venture capital:

Venture capital is a form of private equity and a type of funding where investors provide help to start-up companies and small businesses that are believed to have long-term growth potential and high return value. These projects usually offer the market new products or ideas such as Uber, which revolutionized ride-sharing, or Facebook (before its initial public offering) which changed the concept of communication. 

Venture capital usually makes tremendous profits when making exits, such as selling the company to a larger one (acquisition) or opening it to the public offering. 

Other ways to obtain corporate funding: 

  • Financial institutions, represented by credit unions, banks, and companies specialized in funding businesses and projects, such as providing various loans and credit methods. 
  • Retailers, by acquiring goods through a funding company and benefiting from store credits, as well as cards are known to have high-interest rates.
  • Companies specialized in supplying businesses with products and raw materials through a retail broker as it’s necessary to register financial companies and provide statements. 
  • Suppliers; where an agreement between the supplier and the beneficiary is agreed upon to postpone payment of the price of the goods.