Funding is the act of acquiring resources, either money (financing) or other values such as effort or time (sweat equity), for a project, a person, a business, or any other private or public institution. The soliciting and gathering process of funds is called fundraising.
Economically, funds are invested as capital by lenders in the markets and are taken up as loans by borrowers. There are two ways how capital can end up at the borrower
● Lending via a middlemen is an example of indirect finance.
● Direct lending to a borrower is called direct finance.
An international business depends on its capital structure to find the best debt-to-equity ratio of the funding to maximize value. There must be a balance between the ideal debt-to-equity ranges to minimize the firm’s cost of capital. Theoretically, debt financing generally is least costly due to its tax deductibility. However, it is not the optimal structure as a company’s risk generally increases as debt increases.