• Sources of financefinance image by Christopher Hall from Fotolia.com
  
  Sources of financing for companies can be broadly divided into three categories: debt financing, equity financing or M&A/strategic alliance financing.There are several types of each category, as different companies at different stages of growth will have varying assets and needs, and require different financing alternatives.
  
  

Debt Financing

• Debt financing involves taking out a loan in a traditional manner. This means paying interest on the loan, which generally makes this option more attractive in low interest rate conditions.
  
  Unlike decades ago, companies today have many options in structuring debt financing from banks and other financial institutions, each tailored to meet a specific set of company-specific circumstances.
  
  

Equity Financing

• Equity financing is when a company raises funds by issuing shares of common or preferred stock. Companies often use equity financing when they, for instance, cannot raise sufficient funds for expansion through earnings or when they have to raise additional capital to pay debt.
  
  There are many types of equity offerings, and whether to offer common or preferred shares, and the choice of which specific type of secondary offering depends both on the current economic circumstances and the bylaws of the company.
  
  

M&A/Strategic Alliance Financing

• Companies, especially larger companies, can raise funds through a merger and acquisition (M&A) process or through a strategic alliance. For example, a manufacturer expanding into a new area might form a joint venture with a distributor or even buy a distributor instead of performing its own distribution.
  
  M&A/strategic alliances are a particularly attractive option to companies in high-interest rate environments.