Understand the World of International Financing
Dealing with finance on a global level is called international financing or international macroeconomics. Funds have been raised by the various organizations and also for the international funds. And the Indian companies also have the opportunities to access funds in the market globally. Cross-border transactions can be formed through international financing with the foreign countries of the customers, suppliers, and lenders. Various sources of the funds for international financing are as follows:
1) Commercial banks
Companies get loans from the global commercial banks in the form of the foreign currency. Depending upon the country loans and services differs in the bank. A major source of international financing in the Indian industry is from the standard chartered one.
2) International agencies and the development banks
They are involved in international financing over the years. They are formed by the developed country’s government of the world and it is at the national, regional and the international levels for the different funding projects.
3) International capital market
Multinational companies and the emerging organizations are in need of the loans in the form of rupees and also in the foreign currency. American depositary receipts, global depository receipts, and the foreign currency convertible bonds are used as the financial instruments.
Choices of the source of funds
Borrowing for the short term provides the benefit of the low cost as there will be the reduction in the capital. However, the long-term borrowing is the case many grounds. The equity capital plays an important part in the raising of funds. Now we will see about the factors affecting the sources of funds.
- i) Cost
Costs of getting funds and in utilizing funds are the two types of costs. They should be taken into account when the organizations are using the sources of fund.
- ii) Financial strength
The financial strength of the company should be in such a way that they are able to repay the capital and the interest what they had borrowed. If the organization’s income is not found to be stable means they have to take care in the selection of the preference shares and the debenture.
iii) Business organization and the reputation
It has the influence on the choice of sources of the fund to raise the money in the market.
- iv) Purpose and the duration
According to the requirement of the fund for the time period, the plans have to make by the business. For short-term requirement borrow at the low-interest rate in trade credit and commercial paper and for long-term sources of finance from the debentures and shares.
A blog for the international finance is available and you can continue reading about the financing.