Financing sources in the financial market

Companies need to keep a minimum of cash to finance their daily operational activities, the long-term financial situation may depend on the resources that are obtained in the short term, that is why financial managers must take the necessary measures to obtain these resources, thus they must know which are the entities that at some point can help them out of a possible liquidity problem.

The resources of the company are a fundamental base for its operation, obtaining cash in the short term can somehow guarantee the validity of the company in the market, which is why questions such as Where can you get cash quickly?, How much is the cost of credit? What are the financial credit institutions? What must be done to obtain a greater benefit? and many others that with the content of this writing are intended to clarify with the general presentation of the main financing alternatives existing in the financial market.It is intended to analyze and provide the necessary information to have a broad vision of the sources of financing in Latin America and a detailed compilation of the main financial intermediaries and the forms of cash placement on which the line of credit that frames the operations is based. financing.

Banks

Banking establishments are the mainstay of the Latin American financial system, their main function is to receive funds from third parties on deposit and place them on the market through credit operations. A commercial bank takes the money given by savers plus the capital that belongs to them and offers them on loan in exchange for an interest for the time the money is in their hands and with a guaranteed payment guarantee.

The base of operation of the banks for the granting of credit is based on the "commercial mutual" under the demands of the supervisory entity, (superintendencies) with respect to the term and the interests, since the banking operation is of a character public.

The main credit operations of banks are:

Overdrafts:

It is a type of very short-term financing, it is mainly aimed at covering cash needs. Normally it does not require a written form and its granting is prudential given that, due to the speed in its process, it is normally the manager who individually grants the authorization for its execution. The cost is also agreed on a discretionary basis, without exceeding the maximum limits authorized by law. Eventually and for corporate clients, or as a new product for special clients; In the case of personal banking, so-called "overdraft quotas" have appeared, which can be used automatically by users, although in some cases these operations require additional written form in addition to the traditional current account contract.

Ordinary credits:

These are the system by which banks put money into circulation, they are all those loans that the bank offers between ninety days and a year. The cost of said credits is regulated by the limits established by the financial control entities. If these limits were exceeded, the crime of "usury" would be incurred. All ordinary credits are formalized through a title, which is generally a promissory note, which obliges the borrower to grant the corresponding guarantees.

Discounts:

Another operation through which banks grant credits is the discount of securities such as promissory notes, money orders, bills of exchange and other debt securities. Through this type of operation, the total value of the title is obtained in advance, charged to a third party, by endorsing the title in favor of the person supported by the delivery and endorsing the latter to the bank. The cost depends on the discount rate that is applied to the nominal value of the title and the commissions that may have been agreed. If the discount operations backed by securities are not paid on the due date, the endorser becomes solidarity with the bank, which may make the value of the security callable.

Credit letters:

The granting of credits through the opening of letters of credit is the possibly best-known active operation in the framework of international commercial relations that are created in a sale, almost always these credits are agreed to a fixed term, the interests are agreed at a variable rate on the representative rates of the international market, opening commissions and non-use insurance are also charged.

Savings and housing corporations (cav)

Savings and housing corporations operate with a basic intermediation scheme, capturing resources through constant value savings accounts, fixed term savings certificates and annual deposits that pay a fixed annual interest.

The credits granted by these corporations are directed primarily to the construction sector, for people who wish to acquire housing, urban reconstruction projects, and for construction of buildings in the industrial, agricultural, mining, and everything related to trade activities.

Credit costs depend on two fundamental factors: monetary correction and the interest agreed between the borrower and the lender.

Financial corporations

Financial corporations are known in financial language as " development banks " and are in charge of financial intermediation aimed at participating directly and actively in the long-term saving and investment process, therefore they dynamically participate in the capital market and provide of medium and long-term resources to the real sector of the economy. Therefore, these entities are the only intermediary authorized to maintain permanent investments in productive companies; This is accomplished with capital contributions.

In addition, financial corporations can, like banks, develop documentary credit operations, credits in foreign currency, grant guarantees and credits in legal currency.

Commercial finance companies

Commercial financing companies are intermediaries oriented to finance short and medium term operations, through credits that do not exceed the duration of the contract in more than three years. These entities have lines of credit aimed at financing consumption, with tools such as credit cards and special lines for the purchase of vehicles and durable goods. Its cost is greater than that of bank credit.

Financial leasing companies

Leasing companies operate as a kind of intermediary, in which a very specific lease is made, among the most important terms for entering into this contract are:

The client's order to the leasing company to buy an asset. The purchase by the company of the respective asset and delivery under the financial leasing modality.

At the end of the lease, the lessee must pay the leasing company, in case his decision is to acquire the asset; it is an optional decision and the lessee can freely exercise. The cost is settled with interest higher than the bank credit; However, their tax advantages may lead to an effective cost lower than that of an asset through the traditional route, due to the inflation adjustments to which they are subject and the depreciation expenses.

Finally, it is necessary to point out that obtaining loans in the financial market depend on the guarantees that each of the companies can offer, the person in charge of the financial department must provide relative security of obtaining resources in the short term, hence it gives off one of the responsibilities that it has towards the organization.

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