Izabela Krawczyk-Sokołowska (Poland)

(Technical University of Częstochowa,

Faculty of Management)

External sources

of financing innovative companies

 

Summary

The development of present economy depends on innovations. But the investment activity of an enterprise needs particular financial resources. There are internal and external sources of enterprise financing, the role of external financing sources is especially important.

The article is the review of chosen developmental and innovative activity financing.

 

Introduction.

Each innovative project, each innovative enterprise regardless of the fact who takes it up, and of what is its scope, is connected with necessity of bearing some costs. Therefore decision concerning valuation and choice of the innovative projects belongs to the most important, with regard to company’s finances.

Possibilities of acquiring financial assets , their value and sources of financing, depend on the type of a company, its external environment , and above all type of the realized innovative enterprise.

Innovative policy should be directed towards promotion of the innovative enterprises.

To increase efficiency of the innovative activity of companies, it is necessary to create real conditions for access to miscellaneous sources of financing.

 

External sources of financing companies.

External financing is inflow of the financial assets from outside of a company, especially important when the company decides on development or innovative activity . External source of financing is a good way of financial support for a company on condition that the previous objective and character of an innovative enterprise is not changed[1]. Additional capital can be invested both by the former owners and the new associates on the specified conditions. Then they contribute to financing their own financial assets, it means from outside of the company[2].

Gaining financial assets from outside depends on diverse factors, mostly on: abilities of a company, a kind of enterprise, methods of gaining innovations and the like.

Sorts of selected sources of external financing the innovative activity of companies is shown in the diagram. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


                                                                                                   

 

 

 

 

 

 

 

 

 

 

 

 


Drawing #1  Selected external sources of financing companies activity.

Source: W. Dębski: Zarządzanie finansami przedsiębiorstwa. Teoretyczne i praktyczne aspekty, PWN, Warszawa2005, s.386; Finanse przedsiębiorstwa, pod red. L. Szyszko, PWE, Warszawa 2000, s.68

 

Basic capital – increase of the basic capital of a company is a good way of subsiding the development– innovative enterprise. Additional capital can be invested both by the former owners and organizers of the enterprise or a new associate or associates who join the enterprise on the specified conditions[3].

Acceptance of the new inputs or shares into a company, positively influences  its financial liquidity and increases amount of the own capital, what allows realization of the different investment actions. Moreover, the capital invested in a company will be refunded only during company liquidation.

Issue of stocks is a way of financing , that concerns big companies, having stable market position. In principle each company , after meeting requirements of admittance to the stock exchange may put stocks into the public trading[4]. The possibilities of finding new purchasers should be taken into account, what is the most often determined by the trust on the market. Undoubted advantage of this form of financing is growth of the own capital, what  increases ability of company to handle the debt. A disadvantage can be fact of dispersion of stocks and  undoubtedly costs of issue of stocks, because they are relatively high[5].

Public aid in the EU countries includes all benefits coming from the public sources, which winning some advantages specified business entities, distort  conditions of competition. Public aid includes support given from the EU member state or from government sources. Public aid is given in the form of : grants and tax abatements, capital-investment subsides and bank guarantees also[6].  

This kind of financing sources allows realization of the different social-economic objectives e.g. animation regions of the low development potential, aid for development and research, aid for environment protection, support of development of the small and medium-sized companies, trainings and the like. 

Bank (economic) credits include credit services for the economic entities for financing business activity, for the operating objectives (working capital credits) investment (investment credits) and other needs , which are compliant with credit policy of the relevant bank[7].

Credits are an important source of external financing of the innovative activity of companies. They are one of the forms of supplement of the own funds (capitals) and they are allotted for financing strictly specified objectives[8]. Banks traditionally geared towards financing of companies activity, treat financing of the innovative enterprises with big reserve, because of the increased risk, elongated time of realization, and lack of evaluation systems of the innovative enterprises as well[9].

An important kind of the bank credits are the bridging credits ,  given when a customer needs financial assets before giving basic credit[10]. It is especially vital when the financial assets coming from a entity applying for a credit are demanded, it concerns among others EU structural funds.

Mercantile credit is a special form of a credit. A moneylender is a vendor or producer of goods and services, and a borrower is purchaser of these goods and services[11]. This form of credit occurs mainly when the recipients don’t possess proper abilities  to use bank credits. Mercantile credit in transactions between contractors should be considered as form of delay payment day in relation to the date of sale.

Loan funds are near-bank units, supporting realization of the objectives of increased risk. The funds provide financial aid in the form of preferential loans for small and medium-sized companies, and the individuals beginning business activity[12]. Financial assets being at the disposal of the funds mainly  come form EU and World Bank aid funds, mainly aimed at the issues of fight with unemployment. 

Credit guarantee funds serve financial support in the form of guarantees mainly for small and medium-sized enterprises, having problems with completion of the securities demanded within credit procedure and to meet requirements of the legal nature. The funds give guarantees for companies striving for bank credit, or a loan from the other financial institutions, incapable of independent security of a debt[13]. The funds are near-bank , non-profit institutions.   

A special entity in the market of the guarantee funds is Bank Gospodarstwa Krajowego (BGK), that runs the biggest in Poland, National Fund of the Credit Guarantees having  a nationwide character and possesses contracts concerning cooperation with most of commercial banks. The credits and bank loans set aside for financing investments connected with implementation the new technical ant technological solutions, being a result of the scientific research or developmental works, can be guaranteed[14].   It can be also an investment credit, and credit set aside for purchase of goods and raw materials for production, taken in the national or foreign bank in złoty or foreign currency.  Also BGK manages resources of the European Guarantee Fund[15].

Actual standing of the loan and credit guarantee funds and the role that they can play in financing innovativeness and transfer of technology causes, that capital and technological support as well is necessary for both of these elements, aimed at strengthening of their structure and location at the area of the whole country[16]. 

Venture capital  consist in investment of capital by the external investor, by acceptance of the new issue of actions or shares[17]. The investor offering venture capital thereby becomes a co-owner of the partnership which is financed by him. Moreover this financing concerns   companies which are not listed on the stock exchange. So this venture capital is considered as an element of the so-called , non-public capital market[18].  The only form of security is share in ownership and the rights resulting from it e.g. voting, information and control. Venture capital is offered via fund which is managed by specialists. Venture capitals funds are the closed ones, which activity consist in the fact, that a group of investors (most frequently a dozen or so ) contribute their money for investments of the specified type,  unsure but making a possibility of high rates of return[19]. Stocks or shares of these companies are purchased with intention of their later resale. The investment usually last for 2 to 5 years, and the return of the invested capital, and the potential profits come from sale of stocks or shares of the company. 

Major hopes for increase of investments in the innovative companies are connected with creation of the seed and start-up funds (funds of the seed capital) it is financing the very early phases of development of the innovative project. Financing  establishing a company, its entry on the market and building its position are the most risky investments, demanding high costs of their preparation[20].

Thus necessity of government–state aid  in creating funds of this type should be taken into account, by launching programs of development of such funds. 

Business angels ( venture capital from the private individuals) are the natural persons, who invest their own financial assets in the new (young) companies of high potential of growth[21]. Most often they invest in the branches they already know and where they have some experience.

Corporate venture capital it’s an expression for  the venture capital investment activity realized by major companies. Involvement of the corporations having big technological and market experience in the investment process improves chances to succeed. It mainly results from the correctness of project evaluation and support in the technical and market scope[22].  The unique feature of such investment is the fact, that apart from motive of profit, investment activity is used for understanding and analysis of the new technologies introduced by the small companies to gain new ideas and market concepts[23].

Issue of bonds is the financial instrument useful for a borrower, because in such way he can take out a loan form many creditors for a relatively long time period. However this form of financing can be used  only by the entities that have good and established position[24].   A bond is an investment instrument being long-term  creditor instrument. An issuer takes out a credit from the purchaser of the bond. This credit is given back by the issuer on the settled date of repurchase of bonds. In addition to this issuer pays the bondholder interest[25].  In this form of financing extremely important is confidence of purchaser of bond in the issuer, because this confidence influences possibility and scale of putting the bonds into the trading. Companies which enjoy good reputation are very confident.  In case of the companies little-known on the market there are applied additional guarantees of the others entities , most often banks and insurance companies.

Leasing is a form of the subject credit consist in periodic enabling use of the specified material goods with some payment, mainly investment ones without necessity of buying it[26].  Leasing consist in handing over by a lessor (makes goods available) to a  lesse (uses the goods) for payable use for a specified period of time some specified goods. Lesse first acquires specified item and thanks to its use he gains some assets to pay the obligation[27]. It is especially important form of the financial support for the economic entities, which have vital problems in fulfilling demands as it concerns bank credits e.g. security of the credit payment. Leasing constitutes one of the basic forms of financing innovations.

Factoring is a transfer of obligation from a creditor (company) onto a factor (commercial bank). This contract obliges  to pay all of the amounts due of the company towards  suppliers of goods and services and to exact payments from the company’s debtors, even if thy have some difficulties in payments[28].  However, this form of financing innovative enterprises is used rarely, mainly because of costs and necessity of having fairly established position and current conducting production activity and the like. Factoring is an alternative form of the short-term financing of companies especially for that ones, that for them bank credit is restricted both from a point of view of  costs and the bank procedures[29].

 

Conclusion

Innovativeness of the Polish economy is decidedly lower than in the EU countries, what mostly result from relatively low outlays on the research-development activity, weakness of transfer of technology and knowledge, and also low propensity of the production companies for innovations.

A vital incentive for interest in the innovative activity of companies is a proper system of tax abatements within the scope of the regulations concerning personal income tax (PIT) and corporate income tax (CIT). Thanks to the new regulations [24]: an entrepreneur may deduct from tax base (on specified conditions) purchase the new technology from the Polish or foreign scientific units. Moreover there is possibility to count into the cost expenditures on development works, regardless of their effect, period of amortization of the accomplished development works has been cut down from  36 to 12 months, 22% VAT rate for the scientific-research services has been introduced.

Policy of the state should be aimed at  promotion of the innovative companies through proper financial system within the scope of taxes, possibilities of support by the public means, access both to credits and bank loans and outside banking loans. Extension of system of the credit guarantees and loan funds and other forms of financing i.e. investment funds and venture capital is also necessary.

Despite of considerable diversity financing sources of the innovative activity of companies, often they are a basic barrier to their development, what mainly results from lack of the cohesive system of supporting innovations. Only the change of the previous policy of the state towards increase of accessibility of sources of  external financing, through facilitation of possibility of use diverse financial instruments, can accelerate development of the innovative companies in Poland. Development and increase of the innovative level of companies demand diverse activities and enterprises. Without capital no innovation is possible , and without innovative processes it is impossible to compete at any area of market.

The new financial-legal solutions are still necessary, that encourage entrepreneurs (national and foreign) and economic entities to invest in innovations (tax abatements, investment allowances, lengthen amortization and the like).

 Literature

[1]Bogdanienko J, HafferM, PopławskiW.: Innowacyjność przedsiębiorstw, Uniwersytet Toruński, Toruń2004r.

[2]Cenkier A, Felis P,Gołębiowski G.:Przedsiębiorstwa, [w:] System finansowy w Polsce, pod red. B. Pietrzak, Z. Polański, B. Wożniak, PWN, Warszawa 2003r.

[3]Dębski W.: Zarządzanie finansami przedsiębiorstwa. Teoretyczne i praktyczne aspekty, PWN, Warszawa2005r.

[4]Dobosiewicz Z.:Wprowadzenie do finansów i bankowości. PWN, Warszawa 2005

[5]DragunowiczM, HeropolitańskaI, Sterniak-KujawaJ, SendekW.: Kredytowanie działalności gospodarczej małych przedsiębiorców. Twigger, Warszawa 2001r.

[6]DudaJ.: Venture capital a wzrost konkurencyjności polskiego sektora MSP,[w:]”Strategia Lizbońska a zarządzanie wartością”, pod red. L. Pawłowicz, Wyd. CeDeWu.PL, Warszawa 2006r.

[7]Głodek P, Gołębiowski M.: Finansowanie innowacji w małych i średnich przedsiębiorstwach, Wyd. DjaF, Warszawa- Kraków 2006r.

[8]Grzywacz J, Burzacka- Majcher M.: Płynność finansowa przedsiębiorstwa, [w:]”Finanse przedsiębiorstwa”, pod red. P. Karpuś, wyd. Uniwersytetu M.Curie- Skłodowskiej w Lublinie, Lublin 2006r.

[9]Innowacyjność polskich mikroprzedsiębiorstw, pod red. A. Żołnierskiego,      Polska Agencja rozwoju Przedsiębiorczości, Warszawa 2005r.

[10]Janasz K.: Kapitał prywatny w finansowaniu działalności innowacyjnej przedsiębiorstw w procesie transformacji,[w:]”Innowacje w działalności przedsiębiorstw w integracji z Unią Europejską”, pod red. W. Janasza,Difin, Warszawa 2005r.

[11]Sosnowska A, Poznańska K, Łobejko S, Brdulak J, Chinowska K, Finansowanie projektów innowacyjnych w przedsiębiorstwach polskich i w wybranych krajach Unii Europejskiej, [w:] „Systemy wspierania innowacji i transferu technologii w krajach Unii Europejskiej i w Polsce”, pod red. W. Burdeckiej, Agencja Rozwoju Przedsiębiorczości, Warszawa 2003r.

[12]Szatkowski K.: Ekonomiczne uwarunkowania działalności innowacyjnej, [w:]”Zarządzanie innowacjami technicznymi i organizacyjnymi”, pod red. M. Brzezińskiego, Difin, Warszawa 2001r.

[13]Tamowicz P.: Venture capital- kapitał na start, Instytut Technologii i Eksploatacji; Polska Agencja Rozwoju Przedsębiorczości, Gdańsk 2004r.

[14]Tamowicz P, Rot P.: Informator fundusz venture capital w Polsce, Polska Agencja Rozwoju przedsiębiorczości, Warszawa 2002r.

[15]Ustawa o Funduszu Poręczeń Unijnych z dnia 16 kwietnia 2004roku, Dziennik Ustaw, nr121,poz1262

[16]Woźniak B.:Pomoc publiczna,[w:] „System finansowy w Polsce”, pod red. B. Pietrzak, Z. Polański, B. Wożniak, PWN, Warszawa 2003r.

[17]Zachorowska A.: Ryzyko działalności inwestycyjnej przedsiębiorstw, PWE, Warszawa 2006r.

 

Izabela Krawczyk- Sokołowska, Ph.D. – Katedra Finansów, Bankowości i Rachunkowości Zarządczej, Wydział Zarządzania, Politechnika Częstochowska, Al. Armii Krajowej 19B, 42-200 Częstochowa, e-mail:krawczyk@zim.pcz.pl

 

 

 

 

 

 

 

 



[1]Szatkowski K.: Ekonomiczne uwarunkowania działalności innowacyjnej, [w:]”Zarządzanie innowacjami technicznymi i organizacyjnymi”, pod red. M. Brzezińskiego, Difin, Warszawa 2001, s.132

[2] Cenkier A, Felis P,Gołębiowski G.:Przedsiębiorstwa, [w:] System finansowy w Polsce, pod red. B. Pietrzak, Z. Polański, B. Woźniak, PWN, Warszawa 2003, s.102

 

[3]Szatkowski K.: Ekonomiczne ...s.132

[4] Ibidem, s.132

[5]Sosnowska A, Poznańska K, Łobejko S, Brdulak J, Chinowska K, Finansowanie projektów innowacyjnych w przedsiębiorstwach polskich i w wybranych krajach Unii Europejskiej, [w:] „Systemy wspierania innowacji i transferu technologii w krajach Unii Europejskiej i w Polsce”, pod red. W. Burdeckiej, Agencja Rozwoju Przedsiębiorczości, Warszawa 2003, s.87

[6] Woźniak B.:Pomoc publiczna,[w:] „System finansowy w Polsce”, pod red. B. Pietrzak, Z. Polański, B. Wożniak, PWN, Warszawa 2003, s. 620- 636; Sosnowska A, Poznańska K, Łobejko S, Brdulak J, Chinowska K, Finansowanie... s.106

 

 

[7] Dobosiewicz Z.:Wprowadzenie do finansów i bankowości. PWN, Warszawa 2005, s.162

[8] Zachorowska A.: Ryzyko działalności inwestycyjnej przedsiębiorstw, PWE, Warszawa 2006, s.208

[9] DudaJ.: Venture capital a wzrost konkurencyjności polskiego sektora MSP,[w:]”Strategia Lizbońska a zarządzanie wartością”, pod red. L. Pawłowicz, Wyd. CeDeWu.PL, Warszawa 2006, s.505

[10]DragunowiczM, HeropolitańskaI, Sterniak-KujawaJ, SendekW.: Kredytowanie działalności gospodarczej małych przedsiębiorców. Twigger, Warszawa2001, s.365

[11]Cenkier A, Felis P,Gołębiowski G.:Przedsiębiorstwa, [w:] System finansowy w Polsce, pod red. B. Pietrzak, Z. Polański, B. Woźniak, PWN, Warszawa 2003, s.784

[12] DudaJ.: Venture capital...s.126

[13]Bogdanienko J, HafferM, PopławskiW.: Innowacyjność przedsiębiorstw, Uniwersytet Toruński, Toruń2004, s.106

[14] Sosnowska A, Poznańska K, Łobejko S, Brdulak J, Chinowska K, Finansowanie...s.29

[15]Ustawa o Funduszu Poręczeń Unijnych z dnia 16 kwietnia 2004roku, Dziennik Ustaw, nr121,poz1262

[16] Sosnowska A, Poznańska K, Łobejko S, Brdulak J, Chinowska K, Finansowanie...s.102

[17] Ibidem, s.85

[18]Tamowicz P.: Venture capital- kapitał na start, Instytut Technologii i Eksploatacji; Polska Agencja Rozwoju Przedsębiorczości, Gdańsk 2004, s.9

 

[19]Tamowicz P, Rot P.: Informator fundusz venture capital w Polsce, Polska Agencja Rozwoju przedsiębiorczości, Warszawa 2002, s.6

[20]DragunowiczM, HeropolitańskaI, Sterniak-KujawaJ, SendekW.: Kredytowanie działalności gospodarczej małych przedsiębiorców. Twigger, Warszawa2001, s.9

[21]Innowacyjność polskich mikroprzedsiębiorstw, pod red. A. Żołnierskiego,      Polska Agencja rozwoju Przedsiębiorczości, Warszawa 2005, s.126

[22]Sosnowska A, Poznańska K, Łobejko S, Brdulak J, Chinowska K, Finansowanie... s.85

[23]Głodek P, Gołębiowski M.: Finansowanie innowacji w małych i średnich przedsiębiorstwach, Wyd. DjaF, Warszawa- Kraków 2006, s.22

 

[24]Cenkier A, Felis P,Gołębiowski G.:Przedsiębiorstwa, [w:] System finansowy w Polsce, pod red. B. Pietrzak, Z. Polański, B. Woźniak, PWN, Warszawa 2003, s.780

[25]Finanse przedsiębiorstwa, pod red. L. Szyszko, PWE, Warszawa 2000, s.93

[26]Janasz K.: Kapitał prywatny w finansowaniu działalności innowacyjnej przedsiębiorstw w procesie transformacji,[w:]”Innowacje w działalności przedsiębiorstw w integracji z Unią Europejską”, pod red. W. Janasza,Difin, Warszawa 2005, s.222

[27]Finanse przedsiębiorstwa, pod red. L. Szyszko, PWE, Warszawa 2000, s.74

[28]Szatkowski K.: Ekonomiczne uwarunkowania działalności innowacyjnej, [w:]”Zarządzanie innowacjami technicznymi i organizacyjnymi”, pod red. M. Brzezińskiego, Difin, Warszawa 2001, s.134

 

[29]Grzywacz J, Burzacka- Majcher M.: Płynność finansowa przedsiębiorstwa, [w:]”Finanse przedsiębiorstwa”, pod red. P. Karpuś, wyd. Uniwersytetu M.Curie- Skłodowskiej w Lublinie, Lublin 2006, s.218