Introduction to Institutional Financing
Institutional finance means finance raised from financial institutions other than commercial banks. These financial institutions act as an intermediary or link between savers and investors. They provide finance and financial services in areas which are outside the purview of traditional commercial banking.
The term institutional finance generally consists of the following:
(i) Finance raised from Public Financial Institutions (PFIs).
(ii) Finance raised from Non-Banking Finance Companies (NBFCs).
(iii) Finance provided by Investment Trusts and Mutual Funds (ITMF).
Types of Institutional Investors
There are several types of institutional investors, such as:
- Insurance companies
- Venture capital funds
- Mutual funds
- Real estate investment trusts
Advantages of Institutional Financing
(i) Both risk as well as loan capital are available. Public financial institutions provide underwriting facilities also.
(ii) New companies which may find it difficult to raise finance from the public can get it from these institutions. Assistance is available when recourse to normal sources is impracticable or unprofitable. Modernization and expansion plans can be financed without much strain on the financial structure of the company.
(iii) As these institutions carry out a thorough investigation before granting assistance to a concern, relationship with them helps to increase the credit-worthiness of a company.
(iv) Loans and guarantees in foreign currency and deferred payment facilities are available for the import of required machinery and equipment.
(v) The rate of interest and repayment procedures are convenient and economical. Facilities for repayment in easy installments are made available to the deserving concerns.
(vi) Along with finance, a company can obtain expert advice and guidance for the successful planning and administration of projects.
Focused on financial institutions, SRCA team has expertise across long and short-term insurers, asset managers, collective investment schemes and retirement funds, applying distinct financing, hedging, derivative and balance sheet optimisation strategies in an ever-changing environment (regulatory and investment requirements).