National financing: Registers and notaries

Self-financing sources

The sources of finance to which companies usually resort are traditionally grouped into two categories: self-financing and external financing.

Self-financing sources are not bound by fixed repayment terms as the creditors are the owners of the company. This type of financing can come from:

• Equity financing
• Partners’ contributions
• Own reserves
• Depreciation and provisions

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External financing sources

There are different ways companies can seek financing, though the most sensible strategy is to diversify the methods used. For example, financing options include:

• Line of credit. This provides companies with liquidity and means they only pay interest on the amounts drawn down from a credit facility. Most financial institutions offer this type of financing.
• Factoring is a means of financing whereby sums of money are advanced on services and goods that have already been invoiced. It provides companies with funds without having to depend on the clients' terms and conditions of payment, particularly with respect to large enterprises that usually take one or several months to pay. It is similar to supply chain finance and lines of credit that enable the discounting of promissory notes.
• Crowd angel. This is a tool to facilitate investment in startups with growth potential.
• Venture capital. Specialist companies that invest in startups taking a minority stake over a short period of time.
• Reverse factoring. This is a financial service provided by banks to enable companies to pay for their purchases.
• Assignment of receivables. These are contractual credit facilities through which the lender can later have a share in the receivables.
• Credit. This refers to a contract in which a financial institution undertakes to make funds available up to a set limit.
• Crowdfunding. This consists in a startup or business raising funds or other resources through a network of individuals and/or groups making small donations.
• Discount. Payment in cash of an amount of money represented by a debenture bond yet to mature, after discounting interests and losses.
• Forfaiting. This is a method of financing for exports that consists in discounting without recourse the collection rights on a series of trade bills to instrument the deferred payment of sale and purchase business transactions.
• Forward contracts. A forward contract is a non-standardised contract between two parties to buy or sell an asset at a specified future time at a price agreed at the time of entering the contract.
• Business angels. People who have knowledge of particular sectors and the capacity to invest in and add value to the management of business projects in those sectors.
• Factoring. This is a financial operation that consists in assigning the customer receivables portfolio and thereby converting short-term sales into cash sales.
• Securitisation funds. This consists in financial institutions assigning existing loans on their balance sheets to a securitisation fund.
• Futures. A futures agreement between two parties is one in which they agree to interchange a physical financial asset at a predetermined price and time in the future.
• Guarantee-counterguarantee. This is a financial instrument that facilitates access to credit by giving endorsed guarantees.
• Derivative product markets in Spain. These are products the value of which is tied to the price of another asset which is known as the underlying asset that may take many forms, ranging from shares to stock market indexes to fixed yield securities, interest rates or raw materials.
• Financial options. These are instruments that are established in a contract and that grant the buyer the possibility of buying or selling assets or securities at a determined price until a set date.
• Mortgaging refers to a contract in which property is given as a guarantee against fulfilling a main obligation in such a way that, when this obligation matures, it can be cashed in against the sale price.
• Pledge. This is a contract through which a debtor or third party encumber particularly a moveable property against payment of a debt.
• Loan. A contract pursuant to which a financial institution lends a customer an amount of money which must be repaid along with the accrued interest.
• Leasing. This is a contract pursuant to which a lessor transfers the right of use of an asset to a lessee in exchange for payment of rent over a specific period of time.
• Debt markets. This is a market in which short- and medium-term bonds and securities are traded. Bonds, promissory notes and other debt securities are traded there.
• P2P lending. These are loans given by individuals or companies to other individuals without mediation by a traditional financial institution.
• Promissory notes. These are private documents obliging a person to pay another person the amount of money shown on the document by a certain date.
• Profit participating loan. This type of loan stipulates that, on top of the normal gain on a loan, the lender makes an additional gain depending on the profit made by the borrower.
• Renting. This is a bilateral trade agreement pursuant to which one of the parties is obliged to assign the use of an asset to the other party for a certain period of time in exchange for regular rent payments.
• Swap. This is a financial transaction between two parties who agree to exchange money flows over a period of time following certain agreed rules.
• Phantom shares. These are payments of dividends to people who are not considered to be owners, shareholders or those with a stake in the partnership.

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Financing institutions

Public bodies:

Some public institutions support and advise entrepreneurs. For example, the Official Credit Institute (Instituto de Crédito Oficial – ICO), local public bodies in charge of entrepreneurship and Chambers of Commerce.

To assist in the national recovery, the Government of the Kingdom of Spain has drawn up a Recovery, Transformation and Resilience Plan. This plan channels the EU funding that is available for repairing damage caused by the COVID-19 crisis, and for building a more sustainable future through reforms and investments. It contains specific funding measures.

Public and private banks

In Spain, the government, through the ICO, the European Investment Bank (EIB) and state-owned banks, have put in place a series of financial support measures for SMEs by way of preferential loans at low interest rates.

Private banks have various financing plans for entrepreneurs.

Venture capital firms

These are direct investment or investment fund financial institutions that take temporary stakes in the capital of companies at different stages of their life cycles. With the help of this venture capital, the company aims to increase its value. Once the investment has matured, the investor withdraws having made a profit.

Business incubators and startup accelerators

A business incubator is an organisation designed to speed up growth and ensure the success of entrepreneurial projects providing a wide range of resources and business services, which may include the renting of room space, capitalisation, coaching and networking.

Accelerators seek to speed up project development, particularly during its initial stages (seed phase). They provide several programmes that entrepreneurs can sign up to throughout the year. After a meticulous screening and prior selection process, the managers and mentors of these accelerators select projects that show the greatest potential for growth and have teams with the best implementation capacity.

Business angels

These are private investors that provide the capital to set up companies, generally in exchange for company shares. Business angels invest their own funds, unlike venture capital firms, which professionally manage the money of third parties through a fund.

Mutual guarantee schemes (MGS)

These are not-for-profit financial institutions that work in specific spheres (regions, or to a lesser extent, particular sectors), the purpose of which is to facilitate access to credit for small- and medium-sized enterprises (SMEs) and, in general, to improve their financing conditions by providing guarantees to banks and savings banks, among others.

SMEs benefit from these schemes by obtaining the guarantees they need for credit institutions. MGSs act as the guarantor should the project fail, while also studying and monitoring the viability of the operation.

Alternative stock market

This market is geared towards poorly capitalised companies looking to boost their growth. It is a trading platform designed for small- and medium-sized enterprises with wide-ranging financing needs that need to showcase their business potential and improve competitiveness. Companies that reach the appropriate size can then join the stock market.

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