There are sources of loans other than from banks. Companies usually resort to these financial institutions as a last resort because their interest payments are fixed and if inflation falls, this will make the borrowing very expensive. These financial sources can include pension funds, insurance companies, merchant banks, the European Investment Bank and the ICFC. (Investment and Commercial Finance Corp[oration)

There is also the "medium term note" open as an alternative which is a promisory note issued by the company promising to pay a specified amount on a specified date. The procedure is for the company to write the note and then to sell it in the market place. The interest rate can be fixed or may fluctuate and the maturity date of t

There is also the question of "what does the firm want the financing for?". The reason can either be for the purpose of expansion or settling previously acquired debt. The truth is that even in the healthiest of cases, a small firm faces certain standard small firm problems such as the difficulty to diversify and transaction costs. For example, if a firm is small, this means that whatever it produces or trades is dealt with in much smaller quantities than a larger firm. Thus, the small firm's accounts read a higher cost in purchasing raw materials (per unit), than the costs a large firm has when purchasing the same raw materials at a much greater quantity.

International Economics: theory and Policy.

For the manager looking to raise finance for the company the Stock Exchange offers a number of possibilities, if the company is in a position to meet with the process of listing and the costs. If not, debt capital and its distinguishing features of being less expensive than equity capital, being of lower risk and therefore having a lower rate of return together with tax deductable interest payments, are commonly experienced by managers of small companies.

As an epilogue, an alternative to borrowing, the economic value of leasing is calculated by discounting the incremental cashflows of the lease over the borrowing alternative. In addition to the taxation benefits, leasing helps to preserve cash, varies the borrowing portfolio and provides a less restrictive form of finance. Its certainty and flexibility reduces risk and allows the small companies a greater freedom in their investment decision process because rentals are operating expenses.

The primary function of these markets is to match the lenders to the borrowers and effect the directing of funds between them.

David Begg, McGraw-Hill Book Company Europe, 1997

The small company may issue a debenture, which is a document issued in return for money lent. There are various types of debentures but they all have some features in common. They are usually in the form of a bond, undertaking the repayment of a loan on a specified date and with regular stated payments of interest between the date of issue and the date of maturity. These dividends have priority to be paid before any other dividend is paid to any other class of shareholder. The Companies Acts define the word "debenture" as including debenture stock and bonds. Often the terms debenture and bond or loan stock are interchangeable although I shall mention Bond and Loan Stock a little later on.

Some common words found in the essay are:
Loan Stock, Securities Market, Stock Exchange, Finance Corporation, Issues Market, , Companies Acts, Stock Market, Mascon IRWIN, Greed Risk, preference shares, raising finance, secondary market, company issue, stock exchange, raise finance, specified date, loan stock, ordinary shares, debenture holders, purchasing raw materials, cost debt limited, bond loan stock,
Approximate Word count = 2043
Approximate Pages = 8 (250 words per page double spaced)