In contrast to external financing,

In contrast to external financing, endogenous financing refers to the financing of companies that depend on their own accumulation and comprises essentially three specific forms: profit reserves, capital funds and replacement investments with depreciation conversion. Since the capital of endogenous financing comes from the company, it has the characteristics of originality, autonomy, risk resistance and low cost. Compared to external financing, while internal financing can reduce companies' financing costs by reducing information asymmetry, reducing transaction costs and improving residual control, the ability of internal financing is strongly influenced by the size and profitability constraints of the company. Therefore, due to the limited resources and the limited possibilities of internal financing, it is difficult for small and medium-sized enterprises to meet the continuous development and capital requirements of enterprises only through internal financing.