Legal Definitions - outside financing

Definition: Outside financing refers to the process of raising funds from external sources such as selling stocks or bonds. It is a way for businesses to obtain the necessary capital to operate or expand their operations.

• Equity financing: A company sells shares of its ownership to investors in exchange for capital.
• Debt financing: A company borrows money from a financial institution and agrees to pay it back with interest.
• Floor-plan financing: A car dealership obtains a loan from a manufacturer to purchase inventory, and pays it off as the cars are sold.

These examples illustrate how businesses can obtain outside financing to fund their operations. Equity financing involves selling ownership in the company, while debt financing involves borrowing money that must be paid back with interest. Floor-plan financing is a type of loan that is secured by merchandise and paid off as the goods are sold.