Funding

From EverybodyWiki Bios & Wiki

Funding is the act of providing resources to finance a need, program, or project. While this is usually in the form of money, it can also take the form of effort or time from an organization or company. Generally, this word is used when a firm uses its internal reserves to satisfy its necessity for cash, while the term financing is used when the firm acquires capital from external sources.[1]

Sources[edit]

Sources of funding include credit, venture capital, donations, grants, savings, subsidies, and taxes. Fundings such as donations, subsidies, and grants that have no direct requirement for return of investment are described as "soft funding" or "crowdfunding". Funding that facilitates the exchange of equity ownership in a company for capital investment via an online funding portal per the Jumpstart Our Business Startups Act (U.S.) is known as equity crowdfunding.[2] Funds can be allocated for either short-term or long-term purposes.

Economics[edit]

In economics funds are injected into the market as capital by lenders and taken as loans by borrowers. There are two ways in which the capital can end up at the borrower. The lender can lend the capital to a financial intermediary against interest. These financial intermediaries then reinvest the money against a higher rate.[3] The use of financial intermediaries to finance operations is called indirect finance. A lender can also go to the financial markets to directly lend to a borrower. This method is called direct finance.

Research Funding[edit]

Research funding is funding used for research-related purposes. It is most often used to describe funding in the fields of technology or social science. The allocation of funds are usually granted based on a per project, department, or institute basis stemming from scope of the research or project. Research funding can be split into commercial and non-commercial allocations.[4] Research and development departments of a corporation normally provide commercial research funding. Whereas, non-commercial research funding is obtained from charities, research councils, or government agencies.

Launch A Business[edit]

Entrepreneurs with a business concept would want to accumulate all the necessary resources including capital to venture into a market. Funding is part of the process, as some businesses would require large start-up sums that individuals would not have. These start-up funds are essential to kick-start a business idea, without it, entrepreneurs would not have the ability to carry out their concepts in the business world.[5]

Uses On Investment[edit]

Fund management companies gather pools of money from many investors and use them to purchase securities. These funds are managed by professional investment managers, which may generate higher returns with reduced risks by asset diversification[6] The size of these funds could be as little as a few millions or as much as multi billions. The purpose of these funding activities is mainly aiming to pursue individual or organization profits.

Securing Loans[edit]

A company or an individual may secure a loan to get access to capital. Often borrowers must use a secured loan where assets are pledged as collateral. If the borrower defaults, ownership of the collateral reverts to the lender. Both tangible and intangible assets can be used to secure loans.[7] The use of IP as collateral in IP-backed finance transactions is the subject of a report series at the World Intellectual Property Organization.

References[edit]