Sources of Finance

A collection of vocabulary terms and definitions regarding internal and external sources of finance, equity, debt instruments, and factors influencing financial decisions.

Internal Sources

Fund-seeking activities that exist within the business itself, such as sales of inventories or services activities.

External Sources

Fund or capital that comes from people or institutions outside of the business through the issuance of shares or loans from financial institutions.

Equity Financing

The process of obtaining funds by selling a portion of the company’s equity through shares or stocks to individuals or the public.

Angel Investor

Rich individuals with sharp business minds who purchase bulk amounts of shares in businesses they believe have high potential for future returns.

Crowdfunding

A method where small investors provide small amounts of capital to companies because they have faith in the company’s ideas.

Venture Capital

Private equity financing where investors provide larger amounts of capital to businesses expected to grow rapidly and appear on stock exchanges.

Initial Public Offering (IPO)

A process that allows companies to raise large amounts of capital by offering shares to the general public in capital markets.

Bond

A form of long-term financing where the issuer pays periodic coupon interest and the principal amount at maturity.

Malaysian Government Securities (MGS)

Debt instruments issued by the government to stimulate the economy, comprising MGS, MGII, MTB, and MITB.

Term Loan

A monetary loan repaid in regular payments over a set period, usually lasting between $1$ and $10$ years, and sometimes up to $30$ years.

Secured Term Loan

Loans backed by collaterals such as properties, land, or cash deposits, also known as an asset-backed line of credit.

Unsecured Loans

Loans granted on a clean basis without collateral, such as credit cards, commercial papers, and debentures.

Syndicated Loan

A single loan granted by a group of banks to a single borrower, managed by a lead arranger bank.

Revolving Line of Credit

A credit commitment for a specific time period up to a limit that a firm uses for working capital requirements as needed.

Debenture

Unsecured corporate debt based on the creditworthiness of the issuer, typically with maturities of $10$ years or longer.

Commercial Papers

Short-term unsecured corporate debts with maturities up to $270$ days.

Peer-to-Peer (P2P) Lending

An online platform that connects firms seeking funds (borrowers) directly with individual investors (creditors).

Business Credit Card

A way for businesses to borrow money up to a certain limit and pay it back over time, often with higher interest rates than other loans.

Inventory Financing

A specific loan used to purchase inventory, allowing the business to acquire stock without using other personal assets.

Debt to Equity Ratio

A financial tool used to provide an accurate overview of a firm's need for a specific type of capital structure.