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Definition: Distributive bargaining is a competitive bargaining strategy in which one party gains only if the other party loses something. It is used as a negotiation strategy to distribute fixed resources such as money, resources, assets, etc. between both the parties. Description: Distributive bargaining is also known as zero-sum negotiations because the assets or the resources which need to be distributed are fixed. So, all the negotiations will have to happen by taking that into context. The ultimate aim, under distributive bargaining approach, is not to come to a win-win kind of situation but that one side wins as much they can. Both parties will try to get the maximum share from the asset or resource which needs to be distributed. We end up using distributive bargaining approach in our daily lives as well when we shop. Usually distributive bargaining approach works well with products which do not have a fixed price. For example, if you go to the supermarket and buy some products, you wont be able to bargain because they have a fixed price. Either you can buy the product or leave it. Lets understand distributive bargaining approach with the help of another example. You go to Lajpat Nagar market in New Delhi to buy a rug. You are visiting the shop for the first time and if the rug is of adequate quality, both the parties might not see each other again. The shopkeeper will quote you one price, rather than any lower rate as suggested by you. In distributive bargaining approach, both the parties try to know each others walk-away-value to take a decision. After that, they make a deal in that it is closer to their own goal rather than adjusting according to the competitors. In case the rug cost you Rs 1000, and you give a counter offer of Rs 800. The shopkeeper loses Rs 200. He/she would try to limit the loss and try selling the at around Rs 900-950.

Definition: Fully drawn advance is a financing method which gives you the freedom to take funds or a loan but only for longer durations. It is an ideal way of financing assets which have a long shelf life such as real estate or a manufacturing plant and equipment, etc. Description: Fully drawn advance allows a business owner to get access to instant cash which could be repaid back on the agreed and predetermined schedule along with interest. In this type of advance, the interest rate charged could be flexible or fixed but the loan is usually secured. This type of loan is extended for a fixed period only. The full amount is given at the beginning of the loan. Usually, commercial banks and finance companies give out these loans. This type of advance is more suited for individual owners as well as for partnership firms and big organisations. The lenders can work on a payment schedule which could be monthly, quarterly, yearly or after six months. Credit cards, invoice financing, overdraft facilities extended by the bank, and line of credit are different types of ways a company access funds. When a company requires funds for a short term then invoice financing is a good option. Here, the customer can get access to funds based on the invoices generated by the company. An advantage of fully drawn advance with a fixed rate of interest is that the payment structure is known and remains the same till the loan is paid out in full. The rate of interest charged is comparatively less than in variable rate of interest loan. The only disadvantage is that if your bank decides to decrease the rate of interest you will not get the benefit because you have opted for fixed rate of interest. Fully drawn advance allows a business owner access to instant cash which could be repaid back on the agreed predetermined schedule along with interest.

Definition:Equity finance is a method of raising fresh capital by selling shares of the company to public, institutional investors, or financial institutions. The people who buy shares are referred to as shareholders of the company because they have received ownership interest in the company.

Description:Equity financing is a method of raising funds to meet liquidity needs of an organisation by selling a companys stock in exchange for cash. The portion of the stake will depend on the promoters ownership in the company.

One of the most sought after methods of raising cash, apart from public issue, is via Venture Capital. Venture Capital (VC) financing is a method of raising money via high net worth individuals who are looking at diverse investment opportunities.

They provide the company with much needed capital to sustain business in exchange of shares or ownership in the company.

A start-up might need various rounds of equity financing to meet liquidity needs. They (VC) may like to go for convertible preference share as form of equity financing, and as the firm grows and reports profit consistently, it may consider going public.

If the company decides to go public, these investors (Venture Capitalists) can use the opportunity to sell their stake to institutional or retail investors at a premium. If the company needs more cash, it can go for right offer or follow on public offerings.

When a company goes for equity financing to meet its liquidity needs, for diversification or expansion purpose, it has to prepare a prospectus where financial details of the company are mentioned. The company has to also specify as to what it plans to do with the funds raised.

Equity financing is slightly different from debt financing, where funds are borrowed by the business to meet liquidity requirement. Ideally, to meet liquidity needs an organisation can raise funds via both equity as well as debt financing.PREV DEFINITIONDistributive Bargaining

Definition: Distributive bargaining is a competitive bargaining strategy in which one party gains only if the other party loses something. It is used as a negotiation strategy to distribute fixed resources such as money, resources, assets, etc. between both the parties. Description: Distributive bargaining is also known as zero-sum negotiations because the assets or the resources which need to be distributed are fixed. So, all the negotiations will have to happen by taking that into context. The ultimate aim, under distributive bargaining approach, is not to come to a win-win kind of situation but that one side wins as much they can. Both parties will try to get the maximum share from the asset or resource which needs to be distributed. We end up using distributive bargaining approach in our daily lives as well when we shop. Usually distributive bargaining approach works well with products which do not have a fixed price. For example, if you go to the supermarket and buy some products, you wont be able to bargain because they have a fixed price. Either you can buy the product or leave it. Lets understand distributive bargaining approach with the help of another example. You go to Lajpat Nagar market in New Delhi to buy a rug. You are visiting the shop for the first time and if the rug is of adequate quality, both the parties might not see each other again. The shopkeeper will quote you one price, rather than any lower rate as suggested by you. In distributive bargaining approach, both the parties try to know each others walk-away-value to take a decision. After that, they make a deal in that it is closer to their own goal rather than adjusting according to the competitors. In case the rug cost you Rs 1000, and you give a counter offer of Rs 800. The shopkeeper loses Rs 200. He/she would try to limit the loss and try selling the at around Rs 900-950.

Definition: Fully drawn advance is a financing method which gives you the freedom to take funds or a loan but only for longer durations. It is an ideal way of financing assets which have a long shelf life such as real estate or a manufacturing plant and equipment, etc. Description: Fully drawn advance allows a business owner to get access to instant cash which could be repaid back on the agreed and predetermined schedule along with interest. In this type of advance, the interest rate charged could be flexible or fixed but the loan is usually secured. This type of loan is extended for a fixed period only. The full amount is given at the beginning of the loan. Usually, commercial banks and finance companies give out these loans. This type of advance is more suited for individual owners as well as for partnership firms and big organisations. The lenders can work on a payment schedule which could be monthly, quarterly, yearly or after six months. Credit cards, invoice financing, overdraft facilities extended by the bank, and line of credit are different types of ways a company access funds. When a company requires funds for a short term then invoice financing is a good option. Here, the customer can get access to funds based on the invoices generated by the company. An advantage of fully drawn advance with a fixed rate of interest is that the payment structure is known and remains the same till the loan is paid out in full. The rate of interest charged is comparatively less than in variable rate of interest loan. The only disadvantage is that if your bank decides to decrease the rate of interest you will not get the benefit because you have opted for fixed rate of interest. Fully drawn advance allows a business owner access to instant cash which could be repaid back on the agreed predetermined schedule along with interest.

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