How are commercial banks financed? Please explain from the endogenous financing and exogenous financing.

1. Internal financing, as the name suggests, is oriented to the internal financing of the enterprise, which mainly includes internal accumulation, asset realization, internal capital increase and so on. Internal accumulation, in order to raise funds for the long-term development of the enterprise, through the reduction of corporate profit dividends to raise funds for financing.

This financing method is simple, low-cost and low-risk, but the amount of accumulation is low, and the lack of dividends affects the interests of small and medium-sized shareholders, which may lead to the dissatisfaction of small and medium-sized shareholders. Asset realization, refers to the financing method of raising funds by divesting and selling part of the assets through internal asset reorganization.

2. External financing.

External financing is the opposite of "internal financing". The company through the capital market or some investors to raise funds needed for investment projects. The main ways include debt financing and equity financing.

The six main sources include bank loans, equity financing, lease financing, commercial credit, development bank loans and informal financial institutions.

Expanded Information

Debt financing, a way of raising funds by issuing bonds to the public, is widely used abroad and not much used domestically due to domestic regulatory constraints, but with the gradual loosening of the regulations, it can be expected that it will become one of the important channels of financing for the enterprises in the future.

One of the advantages of this method is the low cost of issuance. The bond coupon rate is generally lower than the national commercial bank one-year loan rate. The second is to raise a large amount of capital, better facilitate the enterprise to solve the problem of capital shortfall; the third is the issuance of a wide range, conducive to corporate publicity and brand image establishment.

One of the drawbacks of this method is that there are many conditions for issuance and the approval process is strict. At present, the National Development and Reform Commission and the People's Bank of China need to be coordinated by the approval of the Securities and Futures Commission; the second is the high cost of fund-raising. Because of the strict approval process, the public offering, bringing higher capital raising costs.

The third is the high risk. Bonds to raise a large amount of funds, enterprises face the pressure of repayment at maturity is also large. The fourth is the high cost of default. If the enterprise fails to make timely repayment on the maturity date, it may cause a crisis of public trust in the enterprise and cause trouble for its production and business activities.

Baidu Encyclopedia - Bank Financing

Baidu Encyclopedia - External Financing