To ensure the conditions for fulfilling production tasks, any company needs a sufficient amount of capital. The sources of its formation are diverse. Investors provide their temporarily free financial resources to use the enterprise for profit by both parties.
After all, both the company and the creditors are waiting for remuneration in the form of net profit and interest at the end of the reporting period. Investing is a very important process for production, which allows you to increase income, develop and improve. It is necessary to familiarize yourself with how this is happening in the modern world.
General concept
Investing is a long-term investment of temporarily available funds of the owner of capital in the activities of a company, organization with the aim of generating income. At the end of a certain period, the investor receives it in the form of interest, dividends.
Depending on the type of financing of the company, there are founders of the company and lenders. The first in the formation of the enterprise contributed some property to carry out their core business. They manage the enterprise and at the end of the reporting period make a profit from the sale of finished products.
Creditors provide their capital only for a clearly specified time, after which they return their financial resources back, and also receive a profit in the form of interest. They do not participate in the management of the company.
The higher the risk of non-return of capital, the greater the profit is promised to the investor. For registration of credit relations an investment agreement is concluded.
Types of investment
In addition to the sources of formation, financial investments can be classified according to the principle of their direction of action. Attachments are distinguished by this type:
- primary;
- to expand;
- reinvestment;
- for diversification;
- for fixed assets, etc.
Capital investment is made for a different purpose. When creating a new company, initial injections of funds and property are necessary.
In the course of its activities, the company can expand production, occupy a large part of the market. To do this, equipment, technologies for the manufacturing process of the products are updated, scientific developments are being conducted to improve product quality.
In this case, additional financial sources are needed. Product promotion also requires capital. This will allow you to carry out promotions, pay for the work of consultants, etc.
Sometimes it is required to carry out repairs of equipment, premises, which also requires additional investment. All of these activities are necessary to make more profit.
Investment planning
The essence of investing is to invest a certain amount of funds to get the most profit. To make this possible, the process must be approached very carefully.
This helps investment planning. The results of such reports are of interest to both the head of the enterprise and lenders. This approach allows you to calculate how many attracted financial sources the company can get the maximum profit.
However, such calculations are rather complicated due to the influence of many factors on the predicted values.
Planning tasks
Planned investment (investments are calculated on the basis of existing data for the future period) has a number of goals.
This process sets itself the task of increasing the profits of the borrower and lender.
At the first stage of planning, the enterprise determines the need for investor money. If the fact of the need to attract paid financial sources has been identified, possible options for finding funds are considered.
An assessment of existing investors is carried out, the conditions under which they are ready to provide their capital are analyzed.
Next is the ranking of existing lenders. The priority indicator is the payment for the use of such sources.
The calculation of the effectiveness of investments is made. At the best offer, a business plan is being developed. This is the finished document provided to the investor. If he agrees with the terms of the capital, an agreement is signed.
Conclusion of an agreement
An investment agreement is concluded between two parties. Some types of agreements have more. The main participants in this relationship are the investor and the customer.
The first can be a natural or legal person. He provides his temporarily free financial resources to the borrower on certain conditions. These resources participate in the main activities of the enterprise and generate income to the owner of the capital in the form of interest.
The customer is responsible for the operation of investor funds. The head provides all the conditions for his effective work in the production process.
If, for example, a construction contract is concluded, the contractor also participates in it. He is looking for an investor and customer, receiving a fee for his services.
Terms of an agreement
To protect themselves from possible risks of loss of funds, at the conclusion of the contract, all the nuances of the transaction are considered. They should suit the customer and the lender.
Therefore, the investment (investment is made in any industry) agreement involves a discussion of all issues of the transaction.
The main points are the conditions for payment of interest. They can be fixed or approximate. In the first case, the investor’s income does not depend on the amount of profit that the company managed to get in the operating period. This guarantees the safety of financing, reduces the risks for the lender. However, the profit in this case will be minimal.
When the contract involves the payment of interest by approximate calculation, their value depends on the amount of profit of the enterprise. This increases the risk. But as a result, the investor can get a significant reward.
All payment conditions, situations of their possible delay must be specified in the contract.
Transfer of funds
The investment of funds specified in the documentary agreement between the parties may involve different ways of transferring capital from the lender to the customer.
In the first case, the entire amount provided by the borrower in the business plan is transferred to the company in full after signing the contract.
But sometimes, for certain reasons, capital is transferred to the enterprise in parts. Such a situation is possible if the investor does not fully trust the customer. To secure, the creditor pays his funds in installments.
A similar option is possible if the business plan is still at the development stage and only a certain amount is required for its implementation in production.
Obligations of the parties
The contract should clearly define the obligations of the parties. The customer monitors the fulfillment of the capital work schedule specified in the business plan. At the request of the investor, he must provide information on the implementation of the project, its costs. The borrower also provides investment objects, plots, offices, etc.
He prepares all the reporting documentation for the project, attracts the necessary persons to conclude the contract. It is unacceptable to make extra expenses that are not agreed upon by the business plan.
One of the most important obligations of the borrower is to repay the creditor with interest paid on time.
The investor, for its part, must transfer the documented capital to the borrower.
Nuances
In the process of investing finance, it is important to comply with all the conditions of the current legislation. If the contract is incorrectly executed, there is a risk of non-return of funds to the creditor. Therefore, in such a matter it will be more correct to seek the help of a professional lawyer.
It will help to draw up an agreement correctly, explain some of the nuances, identify risks. If the contract was drawn up by the customer, it makes sense to consult with your lawyer about the correctness of its preparation. This ensures compliance with all applicable laws.
If consultation for some reason is not possible, you need to pay attention to the main points. They are required for an official document. It should clearly indicate the number of the contract, the date and time of its conclusion. There should also be full information about its parties and the location of the company.
Next, you need to pay attention to the presence in the document of important conditions, such as price, project objectives, as well as payments. The rights and obligations of the parties must be fully agreed. This is very important when signing any formal agreement of the type in question.
Investment policy
Borrowing is controlled by the financial services of the enterprise. His performance is constantly being evaluated.
Investing is a fairly often used financial instrument today for many industries. Most often, such resources of the company are used to purchase new equipment or repair old, to start construction. All these actions contribute to the expansion of production or improve product quality.
The more profitable the company was in the reporting year, the more it has the ability to attract paid sources of financing.
Investors provide their capital only to stable, highly rated organizations. Therefore, to attract borrowed capital, it is necessary to optimize all performance indicators of the enterprise.
Investing is one of the ways to strengthen the company's position in the market, expand production, and improve product quality. The borrower and the lender profit from the work of capital. The contract fixes all the conditions of their agreement.
