State and explain the different types of long term financing.

1. Leasing
Leasing is a process by which a business entity can obtain the use of a certain fixed assets for which it must pay a series of contractual, periodic, tax deductible payments. The lessee is the receiver of the services or the assets under the lease contract and the lessor is the owner of the assets. Both parties’ sign an agreement referred to as a lease. There are three types of leases namely;
1. Operating lease - this type of lease doesn’t have any long term obligations on the lessor. An example of an operating lease would be the rental of an office on a 2 years lease cancelable on a 60 days notice.
2. Financial lease - this is a long term lease that places most of the obligation on the lessee.
3. Service lease - under this arrangement, the lessor provides both financing and servicing of the assets during the lease.

2. Term loans
A term loan is a business loan with a final maturity of more than 1 year, repayable according to a specific schedule e.g. to pay according to a loan amortization schedule. The maturity period is usually 3-5 years. These loans are repayable in regular, periodic installments e.g. quarterly, semiannually. The installments are structured so as to pay both a part of the principal and the interest. The interest can be fixed or can change with the market rate.

3. Grants
Grants are a form of funding awarded by private foundations, Corporations, Trusts, a government department or agency. They are based on a competitive process with strict guidelines for applying and using the funds. Grant funding agencies use grants as a way to accomplish a specific goal that the organization wants to achieve. Funder's goals can be relatively specific, such as research into a cure for a certain disease, or they can be more general, such as encouraging development of nonprofit support programs for certain segments of the population. A grant can be a wonderful way to finance a business, given that what you need is in alignment with what the funding organization wants to support.
Grants do not have to be repaid, but they do require a considerable amount of paperwork. In addition to the initial grant application, each organization will have substantial reporting requirements on how the money is used

4. Venture Capital
Venture capital is a form of financing for a company in which you give up some level of ownership and control of the business in exchange for capital for a limited timeframe, usually 3-5 years. Venture capitalists usually exit through an Initial Public Offering (IPO), a merger, a sale of the business or a buyout.
Venture capital firms are limited partnerships or closely held corporations that invest in early-stage, risk-oriented business endeavors. Essentially the venture firm is a group of investors who have pooled their money towards investments focused within certain parameters. The participants in venture capital firms can be institutional investors like pension funds, insurance companies, foundations, corporations or individuals.
The investment most commonly is secured with private stock in the venture or a legal instrument that can be converted to stock. Unlike banks, which seek their return through interest payments, venture firms are looking for capital appreciation. Their payoff is how much their original investment has increased. Venture firms generally are looking for a return of five to ten times the original investment.

5. Share capital
1. Ordinary shares
This is that finance that is contributed by the ordinary shareholders of a business. It’s raised through the sale of company ordinary shares.
2. Preference share capital/quasi equity
This is finance contributed by preference share holders. It’s also referred to as quasi equity as it combines features of debt and equity finance. It’s referred to as preference share capital because it’s accorded preferential treatment over ordinary shareholders in the following instances;
1. It receives dividend before ordinary shareholders.
2. Its accorded preferential treatment in sharing the assets of a company in the event of liquidation.

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Lellah answered the question on November 8, 2021 at 07:42