Explain types and characters of security finance in finance.

Security finance is also called corporate securities. In this, funds are mobilised through shares and debentures. These kinds of funds play an important role in capital structure of a company.

Characters of security finance are as follows

  • Long term source of finance.
  • Corporate securities.
  • Repayment of finance is very limited.
  • Plays major role in capital structure of a company.
  • It includes both shares and debentures.
  • Major role in company’s capitalisation.

Types of security finances

The types of security finances are as follows −

Ownership securities or capital stock

  • Commonly called as shares. Shares are most common method of raising finance by a firm.

    • Equity shares.
    • Preference shares.
    • No par stock.
    • Deferred shares.

Creditors’ securities or debt capital − In this, funds are mobilised through creditors. Debentures and bonds are two major types of creditors securities, which are as follows −

  • Debentures
    • Unsecured debentures.
    • Secured debentures.
    • Redeemable debentures.
    • Irredeemable debentures.
    • Convertible debentures.
      • Non-convertible debentures.
      • Fully convertible debentures.
      • Partly convertible debentures.
    • Other types are −
      • Collateral debenture.
      • Guaranteed debenture
      • First debenture.
      • Zero coupon bond.
      • Zero interest bond/debenture.
  • Bonds

Updated on: 11-Aug-2020


Kickstart Your Career

Get certified by completing the course

Get Started