funding

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Funding

Used to describe the refinancing of a debt prior to its maturity (the same as refunding). In corporate finance refers to the floating of bonds to raise finance and levels of capital. See also: refunding.

Funding

1. See: Refinancing.

2. The act of raising capital to conduct an activity. For example, if a company issues a bond to finance the construction of a factory, it is said to be funding the factory.

funding

the process of replacing maturing short-term LOANS by long-term loans in order to reduce the ratio of short-term borrowing to long-term borrowing. Funding is undertaken by the government in its management of the NATIONAL DEBT, and by companies who use the proceeds of DEBENTURE and LOAN STOCK issues to pay off short-term borrowings and overdrafts.

funding

the process by which a government or company converts its short-term, fixed-interest DEBTS into long-term, fixed-interest debts. This involves persuading holders of short-term FIXED-INTEREST FINANCIAL SECURITIES to relinquish these in return for an equivalent amount of long-term, fixed-interest financial securities, and this usually can be done only by offering a more attractive rate of interest on the latter.

Funding is undertaken by the monetary authorities as a means of reducing the liquidity of the banking system and by companies as a means of improving their short-term liquidity. The government (through the Bank of England) borrows money by issuing short-dated TREASURY BILLS and long-dated BONDS. For fiscal reasons (for example, the deferment of redemption payments) the government may want to restructure its PUBLIC SECTOR BORROWING REQUIREMENT, switching away from bills to bonds. Additionally, funding is used as part of MONETARY POLICY, for example, replacing maturing bills (which are held as part of the commercial bank's liquidity ratios) by bonds in order to reduce the MONEY SUPPLY. See OPEN MARKET OPERATION, MONETARY POLICY COMMITTEE, MATURITY STRUCTURE.

funding (a loan)

The act of a lender paying money under a loan.