Because the financing is carried out within the company, there is no need to actually pay interest or dividends to the outside, and it will not reduce the company's cash flow. Because the funds come from inside the company and there is no financing cost, the cost of internal financing is much lower than that of external financing.
External financing
The external financing of listed companies can be divided into debt financing methods of borrowing from financial institutions and issuing corporate bonds, equity financing methods of issuing new shares and semi-equity and semi-creditor methods of convertible bonds.
Legal basis: Article 178 of the Company Law of People's Republic of China (PRC). When a limited liability company increases its registered capital, the contribution of the newly-increased capital subscribed by shareholders shall be implemented in accordance with the relevant provisions of this Law on the establishment of a limited liability company. When a joint stock limited company issues new shares to increase its registered capital, shareholders shall subscribe for new shares in accordance with the relevant provisions of this Law on the establishment of a joint stock limited company and the payment of shares.