Understanding Finance from scratch

Chapter 31 What to do when you are short of money, how to become a master of capital operation - learn some financing knowledge every day (2)
Generally speaking, bill discounting can be divided into three types, namely discounting, rediscounting and rediscounting.Discounting means that the customer (bearer) sells undue bills to the discounting bank in order to obtain cash in advance.The discounting of bills that general industrial and commercial enterprises handle with banks belongs to this category; rediscounting refers to the transfer of undue bills purchased by banks with discounts to other commercial banks, and rediscounting is generally a mutual lending of funds between commercial banks One method: rediscounting refers to the behavior that the discounting bank discounts the undue discounted bills to the People's Bank of China and obtains refinancing from the People's Bank of China by transferring the bills.Rediscount is a credit business of the central bank and a monetary policy tool used by the central bank to implement monetary policy.

The types of bill discounting can also be divided into three types: bank bill discounting, commercial bill discounting, bond and treasury bill discounting according to different bills.

Having said that, everyone understands that bill discounting is actually a "quick loan" in disguise.However, bill discounting and loan issuance are both asset businesses of banks, both of which are financing for customers, but there are many differences between the two.

First, the liquidity of funds is different.Due to the negotiability of bills, holders of bills can go to banks or discount companies for discounts in exchange for funds.Generally speaking, the discounting bank can only demand payment from the payer when the bill is due, but if the bank needs funds urgently, it can rediscount to the central bank.But the loan has a time limit and cannot be recovered before maturity.

Second, the timing of interest collection is different.In the discount business, the interest is deducted from the face value of the bill when the business occurs, which is the pre-deduction of interest.The loan is charged after the interest, it can be recovered together with the principal when it expires, or according to the contract, interest is charged periodically.

Third, the interest rate is different.The interest rate of discounted bills is lower than that of loans, because the purpose of discounting bills by the bearer is to obtain the financing of the current funds, not without such funds.If the discount rate is too high, the burden on the bearer to obtain financing funds will be too heavy, the cost will be too high, and the discount business will not happen.

Fourth, the scope of fund use is different. After the bill is discounted, the bearer has the full right to use the fund. He can use the fund according to his own needs without any restrictions from the discounting bank or company.However, when the borrower uses the loan, it is subject to the review, supervision and control of the lending bank, because the use of loan funds is directly related to whether the bank can recover the loan well.

Fifth, the parties to the debt and creditor's rights are different.The debtor of the discount is not the person who applies for the discount but the drawer, that is, the payer. Only when the payment is refused can the discounter or the indorser be able to recover the bill.The debtor of the loan is the person who applies for the loan, and the bank directly has a debt relationship with the borrower.Sometimes banks also require the borrower to find a guarantor to guarantee repayment, but it is still much simpler than the relationship of the discount business.

Sixth, the scale and duration of funds are different.The amount of bill discounting is generally not too large, and the capital scale of each discount business is limited, and partial discounting is allowed.The term of the bill is relatively short, generally 2 to 4 months.However, there are various forms of loans with different term lengths, and the scale is generally large. When the loan expires, the borrower can continue to lend with the consent of the bank.

Debt financing: short-term and medium-term debt investment opportunities

A real estate development company in Jiangsu and Zhejiang, with a total project investment of 1 million yuan, self-owned funds of 3000 million yuan, outstanding bank loans of 5000 million yuan, and property under the name of the company (assessed value of 1 million yuan) as collateral.There is still a need to borrow 1 million yuan to repay the bank's due loan and complete the project construction (because the bank loan has not been repaid and has been extended, therefore, it cannot borrow from the bank and can only seek other financing channels).In the end, the real estate development company obtained financing from a financial company. The financial company first repaid the bank loan of 5000 million yuan, and at the same time re-registered the property as a mortgage, and then lent 5000 million yuan to complete the post-construction of the project.

This is a typical case of debt financing, so how is debt financing carried out?

Debt financing is also called debt financing. The so-called debt financing refers to the financing obtained by the enterprise through borrowing money. For the funds obtained by debt financing, the enterprise must first bear the interest of the funds, and in addition, it must repay the principal of the funds to the creditor after the loan is due. .The characteristics of debt financing determine that its use is mainly to solve the problem of the shortage of working capital of enterprises, rather than for expenditure under capital items.

The result of debt financing is to increase the liabilities of enterprises. According to different channels, debt financing is mainly divided into bank credit, private credit, bond financing, trust financing, project financing, commercial credit and leasing, etc.

Compared with equity financing, debt financing faces simpler risks, mainly including guarantee risk and financial risk.As the main channel of debt financing, there are generally three types of bank loans: credit loans, mortgage loans and secured loans. In order to reduce risks, secured loans are the most commonly used form of banks.

So, specifically, how is debt financing carried out?

When an enterprise borrows money from a bank, it must first find an enterprise with certain economic strength as a guarantor, and assume joint and several liability for the bank loan. This behavior is called mutual insurance.A large number of mutual guarantees can easily form a guarantee circle among enterprises. Once there is a problem with the operation of one enterprise in the circle, it may cause a chain reaction, causing other enterprises to face serious debt risks.

The private credit of private enterprise owners is equivalent to private private loans.This is a unique way of private enterprise debt financing: it is not only the most irregular corporate financing method, but also the most common financing method in private enterprises.The amount of financing is generally small, and its stability is difficult to determine.

Business credit between enterprises.This is a method of raising funds from suppliers in the form of purchase payments and bills payable, that is, through inter-enterprise commercial credit, the use of deferred payment to purchase the products required by the enterprise, or the use of advance payment, deferred payment The way to deliver the product, thereby obtaining a short-term source of funding.

lease.Modern leasing is a financing method that combines commodity credit and capital credit. For demand-side enterprises, it has the characteristics of "borrowing chickens to lay eggs and repaying money with eggs" in the leasing business to solve the shortage of funds of enterprises and reduce Occupation of funds, development of production, and improvement of efficiency.There are many forms of leasing, such as operating lease, agency lease and financial lease.

Loans from banks or other financial institutions.This method can achieve the purpose of financing relatively easily and quickly, and its specific methods include bill discounting, short-term borrowing, medium-term borrowing and long-term borrowing.However, it is very difficult to obtain a large amount of loans from financial institutions such as banks in a timely manner, because the lender pays special attention to the safety of funds, and for this reason has put forward systematic financial index control for enterprises, such as asset-liability ratio, growth rate, Profit margins, etc., especially when the enterprise is temporarily in trouble, it is difficult to meet a series of requirements of the bank.

Financing from the capital market.Enterprises can raise funds by issuing bonds in the financial market, which is mainly used to raise long-term funds.At present, my country's bond market is relatively small in scale and has a single variety, which needs to be further improved.

Use foreign capital.Its forms mainly include seller's credit, buyer's credit, compensation trade, foreign government loans, and loans from international financial institutions.The six types of debt financing methods of enterprises are listed above. For enterprises, the types of liabilities are various and are a combination of various forms of liabilities. conditions, determine the debt structure of the enterprise, and adjust this debt structure at any time with changes in time and business conditions.

Equity financing has become a common practice

A private enterprise was restructured from a state-owned enterprise. After the reorganization, it has a complete operating record for more than two years, and its development is relatively smooth. In 2004, the net profit of the enterprise exceeded 2000 million yuan, and in 2005, the net profit exceeded 3000 million yuan. In 2005, the net assets were about 7500 million RMB.The sales market of the company's products is stable, and 60% of the products are exported abroad.Later, in order to increase production capacity, reduce production costs, and enhance profitability, the company planned to purchase about 5000 million yuan of production equipment, and decided to introduce strategic investors to solve the funds needed to purchase equipment by way of equity investment.

The company contacted a large financial company. After a round of contacts, it finally determined the most feasible investment institution in Hong Kong. The investor has conducted several on-site inspections of the company and conducted market analysis. Signed the investment letter of intent.Then the investor conducted due diligence on the company before investing, including financial and legal due diligence, and the investor hired overseas accountants and lawyers to complete this work.Due to the company's adequate preparations in the early stage, the due diligence work is progressing smoothly and the results are satisfactory.On the basis of the correct results of the investigation report of the professional organization, the investor quickly decided on the equity investment in the company, and the investment of 5000 million Hong Kong dollars accounted for about 30% of the company's equity.After the investment is completed, the company is preparing for the next step to apply for a direct listing.

This is a complete equity financing process. Such cases are not uncommon. Equity financing has become the financing choice of many companies.

Equity financing refers to the financing method in which the shareholders of an enterprise are willing to give up part of the ownership of the enterprise and introduce new shareholders through capital increase of the enterprise.With the funds obtained from equity financing, the company does not need to repay the principal and interest, but the new shareholders will share the profits and growth of the company with the old shareholders.

Equity financing is divided according to financing channels, and there are two main categories, public market offerings and private placements.The so-called open market offering is to raise funds by issuing corporate stocks to public investors through the stock market, including the listing of companies that we often say, additional issuance and allotment of listed companies are all specific forms of equity financing using the open market.The so-called private placement refers to a financing method in which a company finds a specific investor by itself and attracts them to increase their capital to become a shareholder of the company.Because the vast majority of stock markets have certain requirements for companies that apply to issue shares. For enterprises, it is difficult to reach the threshold for listing and issuing stocks, and private equity has become the main way for private SMEs to conduct equity financing.

The traditional capital structure theory believes that the cost of equity financing is higher than that of debt financing, and the reasons are not difficult to understand: On the one hand, from the perspective of investors, investing in common stocks is riskier and requires a higher rate of return on investment; On the other hand, for financing companies, dividends are paid from after-tax profits, which does not have the effect of tax deduction, and the issuance costs of stocks are generally higher than other securities, while the interest expenses of debt funds are listed before tax, which has the effect of tax deduction. The role of tax credits.Therefore, the cost of equity financing is generally higher than the cost of debt financing.However, since my country's capital market and listed companies do not have strict dividend distribution restrictions, the cost of using stock financing is relatively low.mainly because:
First, the share capital has no fixed maturity date and does not need to be repaid.Compared with debt financing, stock financing does not have the pressure of repayment of principal and interest at maturity, especially since China has not yet established an effective merger and bankruptcy mechanism, listed companies generally do not need to overthink the risk of being delisted and merged.Therefore, the long-term gratuitous occupation of equity funds is almost considered risk-free, and it is the company's permanent capital, which does not need to be repaid during the company's continuous operation period, unless the company is dissolved.

Second, there is no fixed dividend burden.At present, the operation of listed companies in our country is not standardized. In addition to cash dividends, listed companies widely adopt the form of bonus shares, allotment of shares, and temporary non-distribution of dividends in the form of dividend distribution, so that the cost of equity financing is relatively low.If the company has profits and thinks it is suitable to distribute dividends, it can distribute them to shareholders; if the company has less profits or has profits but is short of cash or has more favorable investment opportunities, it can also pay less or no dividends.

Third, the financing risk is small.At present, the scale of my country's securities market is small, there are few objects available for investment, investors' investment needs are very large, and their enthusiasm for stock investment is also high, which keeps the price-earnings ratio and stock price of my country's stock market at a high level for a long time This level is very conducive to listed companies raising funds in a timely and sufficient amount.And because the common stock capital has no fixed maturity date, and generally does not need to pay fixed dividends, there is no risk of repayment of principal and interest.

Fourth, common stock financing forms equity capital, which can enhance the company's reputation.The common stock capital and the resulting capital reserve and surplus reserve are the basis of the company's external liabilities, which are conducive to further expanding the company's financing channels, improving the company's financing ability, and reducing financing risks.

Financial leasing: the combination of ancient industry and modern finance

At the beginning of April 2004, under the successful operation of Shanghai Financial Leasing Company New Century Financial Leasing Co., Ltd., the country's first real estate "sale leaseback + factoring" financing project was officially signed - a large real estate company in Shanghai owned it A well-known hotel in Hainan was sold to a financial leasing company and signed a five-year "sale and leaseback" contract; the financial leasing company signed a "domestic factoring business" contract with a joint-stock commercial bank, and the leaseback of the real estate was formed The rent receivables were sold to the bank, and the real estate company completed a one-time financing amount of up to 4 million yuan.

So what is the financing process of financial leasing?What are its characteristics?

Financial leasing is when the lessor purchases the fixed assets designated by the lessee from the seller designated by the lessee according to the request of the lessee and according to the prior contract agreement between the two parties. On the condition that all rents are paid, the right of possession, use and benefit of the fixed assets for a period of time is transferred to the lessee.This lease has the dual functions of financing and financing.Financial leases can be divided into three types: direct financial leases, operating leases and sale leasebacks.

Leasing is an ancient industry, and financial leasing combines finance and industry more effectively.Today, with the increasing industrialization of finance and the increasing financialization of industries, financial leasing should not be just a dispensable decoration and embellishment, but should bear greater responsibilities.

In East London 150 years ago, coal mines already leased coal-fired locomotives from manufacturers. At that time, the common way was to sign a weekly lease and extend it to several years.In fact, this has initially formed the embryonic form of modern financial leasing.

At the same time, in the United States on the other side of the Atlantic, the leasing business has also made great progress since the middle and late 19th century. For example, in 1877, the Bell Telephone Company of the United States leased telephones to enterprises and individuals, and the telephone leasing business became popular; at the end of the 19th century, The United Shoe Company of America rents out shoemaking machines, etc. to shoemakers.

Like many other financial innovations, financial leasing in the true modern sense arose in the United States.

Statistics show that after World War II, the world economy began to recover, and the U.S. economy urgently needed to complete the transition from wartime military production to civilian industry.In the process, due to the intensification of international competition, manufacturers' requirements for cost reduction are very urgent.

But at that time, the U.S. government adopted a financial austerity policy, and it was difficult for most companies to raise funds.Under such circumstances, it is logical to have a mechanism to introduce equipment without relying on own funds and borrowing.

According to the data, in 1952, Henry Schofield, the manager of a small food processing factory in California, USA, because he had no funds to update the old truck with a small lift, he considered renting the truck at a price of 125 US dollars per month, and negotiated with a broker. People reached an agreement.

Accordingly, Henry Skfeld had the idea of ​​establishing a leasing company, and made a proposal to the person in charge of a chamber of commerce.It just so happened that the Chamber of Commerce was preparing to introduce $50 worth of new equipment, but did not want to pay the entire purchase price for it at one time.Therefore, the two sides mobilized some supporters, worked together to propose a leasing plan, and successfully obtained a loan of about 50 US dollars from the Bank of America as the purchase funds for the equipment leased to the chamber of commerce.

Due to the success of this transaction, in 1952, Henry Schofield founded the American Leasing Company. Its main business is to purchase equipment from other manufacturers according to the needs of customers, and then lease them to customers.In this way, it not only solves the problem of customers using machinery and equipment as early as possible, but also solves the problem of customers' lack of funds and difficulty in one-time payment.Henry's company is recognized as the world's first financial leasing company in the modern sense.

(End of this chapter)