Funding Options:

Companies in need of additional funds for financing their activities have various options. Most commonly, companies turn to traditional forms of financing, such as obtaining loans from banks. An alternative to conventional forms of borrowing is funding through the capital market, i.e., raising funds by issuing various types of securities. The decision of a company to choose a specific source of financing depends on its financial needs and its capacity for additional borrowing. Typically, relying solely on free cash flow and profits from operations is the least favourable option, although prudent, it is also highly inflexible. Being present on the capital market provides the company with additional financing options, enabling it to respond to unexpected situations and capitalize on excellent opportunities as they arise.
 
When seeking answers to the above questions, you can consider the following:
 
  • Do you want to diversify your sources of funding and thereby reduce dependence on a single (typically banking) source of funds, ensuring greater financial stability?
  • Do you need access to a larger pool of capital?
  • Do you require a longer maturity for repaying the raised financial resources?
  • Are you looking for better competitive terms for fundraising?
  • Do you want greater visibility for your company?
  • Do you wish to offer your owners/creditors the option to exit ownership or early repayment?
  • Are you willing to introduce certain operational improvements in corporate governance and financial reporting?
 
If you answered YES to most of these questions, then raising funds through the capital market is certainly one of the options for your company.

 
  • How to Obtain Financing through the Capital Market?

  • Source of Financing

    When companies seek funding for their businesses through the capital market, they can choose from the following sources of financing:
    • Equity Financing - increasing the share capital by issuing new shares
    • Debt Financing - issuing bonds or commercial papers.

     

    Financing by issuing shares

    When a company issues new or additional shares and offers them to the public, it essentially means selling a portion of its ownership. Buyers of this share become new shareholders or new owners of the company.
     
    Rights arising from ownership of shares, can be categorized into:

    • Financial rights (right to dividends, distribution of remaining capital) and
    • Managerial rights (decision-making on the use of retained earnings, appointment of members of the supervisory board, appointment of auditors, etc.).

     
    When issuing shares, there is no debt created that needs to be repaid to investors, as is characteristic of bond issuance.
     

    Financing by issuing bonds

    Bond issuance represents one form of borrowing capital from investors, creating a debtor-creditor relationship between the company and the investor. In exchange for the borrowed funds, the company must repay the acquired funds along with interest after a specified period (at maturity). Bonds are an attractive instrument for companies, primarily because their issuance does not impact ownership, and bondholders do not have a say in the management and operation of the company. By listing bonds on the stock exchange, the company gains greater exposure and publicity in the broader investment community. The money borrowed from investors must be repaid upon maturity or in instalments. Funds can be replenished by issuing new bonds to replace the previous issuance. Another option is the conversion of bonds into shares at maturity or even at certain points before maturity, reducing the amount of money to be paid to bondholders at maturity (referred to as convertible bonds).
      

    What changes does the issue of securities bring to the company? 

    The issuance of securities and their listing for trading on the exchange brings many advantages connected to the listing of securities on the stock exchange. On the other hand, it also brings some additional (or different) costs and obligations to the company. These depend on the type of market (stock market / SI ENTER market) and the market segment or type of securities (reporting obligations for equity issuers are greater than those for bond issuers).
     
    On our website, you can find information on how to enter on the stock exchange, what are the basic obligations of a company from the decision to issue. On this journey experts and advisors on our markets will be glad to assist you.

  • Where Can I Learn More about the Capital Market?
  • If you want to learn more about the functioning of the capital market and the latest trends, we invite you to join our events.
     
    For companies looking to enter the capital market or increase the value of their company, optimize financial resources, and address all the financing options the market offers, the exchange organizes a special Partner program. In this program, you can participate in company-tailored workshops to learn about this and much more.     
  • Comparison of Funding Sources

  • EQUITY CAPITAL

     
    Shares Issue Assets
    + unlimited capital resources (in theory)  + exclusive control of the owner over the management of the company
    + greater trust with business partners + no requirement for additional reporting
    - involvement of new shareholders in company management - limited capital resources, dependent on owner's asset

     

    DEBT CAPITAL

     
    Bonds Issue Bank Loan
    + greater flexibility in determining repayment terms (maturity, interest rate)                                     + potentially lower interest rates compared to bonds
    + no involvement of bondholders in company management, fewer operating restrictions - lack of flexibility in determining loan terms
    - generally higher interest rates compared to bank loans + issuance costs - additional collateral (pledge of movable/immovable property, securities) and potential operating restrictions
  • Other Financing Options
  •