What is Long-Term Financing?
Long-term financing represents those borrowings or loans which are offered for a period greater than one year. It can be done by issuing equity shares, debt financing, long-term loans, bonds, or leases. Long-term finance is taken either for big projects, company expansion, or financing. Usually, long-term financing deals with huge amounts. The primary objective of long-term finance is to either fund the projects that are strategically benefiting the company or help in the expansion of business operations of the company. This form of funding is generally applied to projects that would create coordination and cooperation within the organization in the subsequent years.
Key Takeaways
- Long-term finance is a form of financial instrument (for example, bonds, bank loans, leases, and other types of debt financing) or any public and private equity instrument with more than one year of maturity.
- The maturity period represents the period from the date of initiation of the bonds, loans, or leases to the final repayment of the principal amount along with the associated interest.
- This form of financing involves huge amounts that are usually applied to large company projects and the expansion of the company.
- There are different sources of this type of financing such as equity capital, preference capital, retained earnings, term loans, and debentures.
Table of Content
- Sources of Long-Term Financing
- Importance of Long-term Financing
- Advantages of Long-Term Financing
- Limitations of Long-Term Financing
- Long-Term Financing – FAQs
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