Enterprises can use different sources of capital for financing their activities. The capital sources can be divided into two main categories – equity and debt. The equity category consists of sources invested by owners in different forms (as common stock or other initial funding) and sources created by the enterprise during its current or previous entrepreneurial activities (as net income, capital surplus, retained earnings). The debt category contains issued bonds, bank loans and loans provided by other financial and non-financial providers. Therefore it is set aside short-term financing for operational purposes such as accounts payable, unpaid wages, and accruals. Capital structure is influenced by many factors such as enterprise industry branch, enterprise size, life cycle stage, availability of capital sources or overall economic situation. Higher indebtedness generally increases financial (or leverage) risk.

Capital sources are strictly categorized according to accounting principles. On the other hand, from the financial management point of view, sources can have features common to both main groups - equity and debt. Loans provided by the individual owner/s, parent or daughter company are classified as debt from the accounting point of view. From the financial point of view, these sources are provided by subjects that are closely related to the enterprise itself. Different reasons can be found for this behavior such as accounting incentives especially taxation, administrative burden connected with raising equity or higher flexibility of the used capital. The importance of this kind of capital has increased in the Czech Republic for 5 or 10 years.

Enterprises can enter insolvency proceedings in the Czech Republic for two reasons: over-indebtedness or inability to repay obligations. These proceedings combine a short-term (operational) view with a long-term view (capital sources). The position of creditors in the insolvency proceeding heavily depends on the classification of the claims (mainly secured and unsecured). Which position the loans provided by related parties take is a question that must be addressed. If the creditor's power in this group is too high, it could negatively affect other creditors' claims. On the other hand, research shows that pre-insolvent companies do not have any incentive to use this special capital source because they are already expecting the coming insolvency.

The paper is one of the outputs of the research project “Financial characteristics of enterprise in bankruptcy” registered at Grant Agency of Academic Alliance under the registration No. GAAA 10/2018.