financings

Financings refer to arrangements by which an entity obtains capital from external sources to fund operations, growth, acquisitions, or liquidity. Financings can be broadly categorized as debt financings, equity financings, and hybrid or alternative forms. Debt financings involve borrowing that must be repaid with interest. Examples include bank loans, lines of credit, term loans, notes, and bond issuances. Terms typically specify principal, interest rate, maturity, covenants, and collateral requirements. Debt can be secured or unsecured, and senior, subordinated, or mezzanine in priority of repayment.

Equity financings involve selling an ownership interest in the entity. This can occur through private placements, venture capital, angel investment, or public offerings. Equity financing provides capital in exchange for shares and may include preferred stock with specific rights and dividends or voting, and potential dilution for existing owners.

Hybrid and alternative financings combine features of debt and equity. Examples include mezzanine debt, convertible notes or preferred stock, and revenue-based financing.

Sources and timing vary by stage and objective. Startups often rely on angel investors and venture capital in early stages, while mature companies may access public debt or equity markets, private placements, or bank facilities. The financing process generally includes planning, term sheets, due diligence, negotiation, documentation, closing, and ongoing compliance.

Key considerations include cost of capital, control and dilution, covenants and protections, repayment terms, and risk of default. Regulatory requirements apply to public offerings and certain private placements, with disclosures and securities-law compliance shaping financings.