Open AccessTaking the Financing Decision Considering the Comparison Between Their Own or Borrowed Funding and Public Funding
Author(s) -
Emilia Calefariu,
Buda Traian Alexandru
Publication year - 2021
Language(s) - English
DOI - 10.37394/232024.2021.1.3
Subject(s) - equity financing , loan , finance , equity (law) , business , public funding , profit (economics) , capital (architecture) , equity capital , economics , capital market , debt , microeconomics , public administration , political science , law , archaeology , history
In this paper we present a method to determine the best financing solution for an enterprise with insufficient funding but with innovative ideas that need funding. We propose a model that calculates the total profit from the developed project. We take into consideration two cases, both for the analysis and also for model: first, financing with borrowed capital (loan capital financing) and second, public funding. As it will be shown, equity financing is a particular case of loan-based financing which is taken in consideration in this model. The proposed instrument is an objective one, so that managers can choose the most profitable path from the two situations presented. Many enterprises from the south-eastern countries are in this situation. They have innovative ideas but few possibilities for implementing them. The model is a fast decision instrument and it can be applied both at the level of large organizations and also for start-ups.