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Sources of finance
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Sources of finance
Security financing (equity, preference

share and debenture)

Loan financing Project financing Venture capital Loan syndication Book building Depository
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Sources of finance
Credit rating Commercial paper Certificate of deposit International depository receipts

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Loan syndication
Loan syndication is a service provided

by merchant bankers for financing a project or for working capital requirement of a company. The financial institutions like IFCI, IDBI, ICICI, UTI are suppliers of finance for loan syndication.

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Advantages of loan syndication

Identification of finance: The

company does not have to identify sources of finance as merchant bankers perform this activity for a fee.
Best price: merchant bankers have

preliminary discussions with the financial institutions for the benefit of both the parties.
Disbursal of loan:- the company 5/2/12

Book Building
Book building is the term which is

used for the sale of new security offered for the first time in the primary market before the trading of this share begins in stock market.
Book building is a process of offering

shares to public in the new issue market through public demand by bidding for the shares. Based on these bids price is discovered . A price band is given and the 5/2/12 is public

Depository or paperless trading

Dematerialization of securities for

electronic trading of shares is one of the major steps for improving the stock market and safeguarding the interest of investors.
The stock market in India was

computerized and trading was made online. The depository act was passed in 1996 for trading online in shares. 5/2/12

Depository or paperless trading

Dematerialization takes place in India

through multiple depository system in India. There are two depository services.
National Securities Depositary limited Central Depository Services limited

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Advantages of Depository system

Paperless transaction Electronic transfer De-mat account Account statement Stamp duties Nomination facility Address change Elimination of correspondance. 5/2/12

Depository operating system

The DOS has a certain defined

procedure of operation and is governed by rules and regulations for dematerialization of shares and for sale and purchase of securities. The sale and purchase procedure has been explained as follows:
1.Depositary: a depository

resembles a bank. An investor has the facility of depositing securities or 5/2/12 withdrawing them. He has to bye and

Depository operating system

2. Depository Participants: DP is

an agent of a depository . He is the link between the investor and depository. Share brokers, banks, and financing institutions can become a DP of a depository after they are registered with SEBI.
3. Opening an account 4. Identification number: The DP

will open the account of the5/2/12 investor

Continue
5. Broker: A DP also does the

function of sale and purchase of securities besides opening accounts of investors.

6. conversion of shares into

dematerialized form: in order to de-materialize physical securities an investor has to fill Demat Request form which is available with DP and submit the same along with physical 5/2/12 certificates.

Factoring
Factoring is a financial intermediary

for credit sales within the country . Receivables are sold by the company to a specialized financial intermediary
Banks and financial institutions

purchase trade bills or promissory notes through discounting and cover the risk of non payment at the time of collection of dues.
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Functions of factor
Sales ledger- The factor keeps the

sales ledger. When he receives the sales invoice his work of opening the ledger begins. He writes the entries of receipts from the customer and send periodic reports to the seller.
Collection of receivables: He sends

notices to the debtor reminding him of the due date. For collection of the receivables the factor maintains a 5/2/12 trained staff.

Functions of the Factor

Financing: a factor purchases the

book debts from the seller in his own favour. He makes advance payments to the seller for assigning the debts to him.
Credit risk: the factor takes up the

entire risk of collections of debt and protects the seller in the event of default by the buyer. This service helps the seller in other important 5/2/12 business areas.

Types of Factoring

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