The fruitful financial activity of any enterprise is practically impossible without attracting borrowed capital from outside. Borrowed funds can significantly expand the scope of the main activity of the subject, accelerate the formation of the necessary financial funds, ensure a more cost-effective use of financial own funds, and ultimately increase the liquidity and financial value of the enterprise. It has already been established that the concept of cash does not apply to the usual treasury bills of the Central Bank of the Russian Federation, but to non-cash money sources, which include settlement accounts and funds from credit institutions.
Ideally, the basis of an economic entity should be its own funds, however, practice in our country shows that for the most part borrowed funds are the basis. That is why the market for borrowed funds is the most important aspect of the financial and economic activities of the enterprise. It aims to achieve a high end result of activity.
By definition, borrowed funds are funds received for a specified period and subject to return with a certain amount of interest for their use. This can be loans from banks and other credit organizations, as well as from the state, funds received from the issuance of securities of debt securities (bonds). The mobilization of borrowed funds is carried out in several ways, the main of which are state financing, raising credit, mobilizing capital through securities. Cash received through the issue and localization of securities is the main source of investment.
Borrowed funds may be raised in the following forms:
- in national currency;
- in a foreign currency;
- in the form of goods (delivery of materials with an agreed deferred payment);
- rent (use in production activities of fixed assets that do not belong to the entity, on a paid basis);
- other forms (use of intangible assets on a rental basis, etc.).
The choice of using any of the forms of borrowing is made by the enterprise on its own, based on the specifics of the main activity, as well as the purpose of the attraction.
Based on the foregoing, it follows that the main creditors for business entities can be commercial and state banking institutions, as well as other organizations engaged in the issue of cash at interest, buyers and suppliers of products, as well as the stock market, acting as an issuer of securities.
An important nuance in lending to an enterprise is that borrowed funds, in whatever volume and form they are attracted, must be secured by the organization’s own assets. This is especially true for those funds that are attracted in cash. Borrowed funds are necessarily secured by the most liquid assets.
Another feature concerns the loan agreement concluded between the lender and the borrower. The fact is that all the obligations in the document concern only the borrower - the safety of material resources, timely repayment of interest and principal, etc. The lender reserves the right to demand the fulfillment of all contract terms.
Despite all the shortcomings and difficulties in attracting borrowed funds into financial activities, enterprises, especially developing ones, will not be able to do without them.