Sources of Finance - 1934 Words

Sources of Finance The financing of every business is the most fundamental aspect of its management. Get the financing right and the company will have a healthy business, positive cash flows and ultimately a profitable enterprise. The financing can happen at any stage of a business s development. On commencement of your enterprise the business entity will need finance to start up and, later on, finance to expand. Finance sources may be internal or external but they may also be short, medium or long term. * Short Term Finance the Business for up to One year. * Medium Term Finance the business for up to Five years. * Long Term Finance the business for more than Five years. A. Long and Medium Term Sources of Finance 1.†¦show more content†¦* They increase their stability and raise the credit score used by banks that value the company’s risk * It is a low-risk investment which increases the chances of a company securing bank financing for future needs. Disadvantages: * If the company uses more bank loan, it will over-leverage company’s assets. 5. Mortgages It is the transfer of the property to a lender on the assumption that the borrower agrees to terms of repayment of the debt, after which time the asset will be transferred to the borrower’s ownership. A mortgage is a common form of security for a creditor. Advantages: * Interest payments on your mortgage are tax deductible. * Mortgage schedules are pre-set, making cash management more predictable. Disadvantages: * Mortgage requires you to pledge the purchased property to the lender. * Failure to make any payment on time, bankruptcy, insolvency and breaches of any obligations in the mortgage agreement will be there. 6. Leasing It is an agreement between lesser and lessee, the lessee obtains the right to use an item and assets owned by the lesser in exchange for periodic payments. The lessee’s ownership of the assets has expired at the end of given agreement period. Advantages: * It offers fixed rate financing; The Company pays at the same rate monthly. * There is less upfront cash outlay; the company does not need toShow MoreRelatedsources of finance1286 Words   |  6 Pagesï » ¿Sources of finance Some sources of finance are short term and must be paid back within a year. Other sources of finance are long term and can be paid back over many years. Internal sources of finance are funds found inside the business. For example, profits can be kept back to finance expansion. Alternatively the business can sell assets that are no longer really needed to free up cash. External sources of finance are found outside the business. For example from creditors or banks. InternalRead MoreSources of Finance1496 Words   |  6 PagesP3 Introduction For this task I will be considering the sources of finance I will need for my company. Why might a business require finance? A business may require finance because they can either: †¢ Be setting up a new business and they do not have enough money to start up. †¢ They may need new equipment to help make the business expand and make more profit. †¢ Or they may even want to replace old machinery. †¢ They may want to move there store to a better location that might benefit thereRead MoreSources of Finance1111 Words   |  5 PagesIntroduction In this essay we will be looking at different sources of finance available for different type of business. Also will be looking at the definitions of different type of sources of finance, the advantages, disadvantages and also giving reasons to why different sources of finance was chosen for the given case studies. Types of sources of finance Bank Loan – is a long term loan and will often be for large amount of money for starting up a business or to expanding. Business will agreeRead MoreSources of Finance972 Words   |  4 PagesSources of finance What are the main sources and finance for UK firms and why? All firms need some kind of financing. Access to finance may differ considerably from firm to firm depending on what type of business they are and how big/known they are; Sole Trader, Public Limited or Private Limited Company. There are both INTERNAL and EXTERNAL sources of finance. Finance can be short, medium or long term. Internal sources of Finance: 2 main types 1) Funds from the owner(s) and the familyRead MoreSources of Finance1627 Words   |  7 PagesUnit 2: Business Resources Assignment 4:P4 Sources of Finance Internal Sources of finance Owners’ savings- the owner of a business often has to use their own personal savings to start a business, particularly if they are a sole trader. This is because banks may not be willing to take a risk and invest in them. Savings are a good source of finance for a business, as interest does not need to be paid to someone else while the money is being used, and the business remains totally in theRead Moresources of finance2021 Words   |  9 Pagesï » ¿Question:   IDENTIFY THE SOURCES OF FINANCE AVAILABLE TO A BUSINESS Answer: There are a number of ways of raising finance for a business. The type of finance chosen depends on the nature of the business. Large organisations are able to use a wider variety of finance sources than are smaller ones. Finance is not just needed when starting a new business, but you may be required to seek further finance even if you’re business is well established i-e further expansion, RD, new product launchRead MoreSource of Finance3105 Words   |  13 Pages1. Identify and describe the various sources of finance 1.1 Internal source 1.2 External sources 2. Assess the implication of the difference sources of finance related to risk, legal, financial and dilution of control and bankruptcy 2.1 Issue debt 2.2 Issue equity 3. Select appropriate sources of finance and make recommendations on the best ways of raising finance TASK 2: Part 1: Assess and compare various costs involve with each source of finance to Vale filters Limited Part 2: PrepareRead MoreSources of Finance7811 Words   |  32 PagesIntroduction - Sources of Finance Introduction to the Sources of Finance resource. Sources of Finance Introduction This resource is designed for use with Accounting courses at A level. This resource is relevant to the following: * AQA Module 5, Section 14.5: Types of Business Organisation, Sources of Finance * OCR Module 2505, Sections 5.3.2 and 5.6.2 For many businesses, the issue about where to get funds from for starting up, development and expansion can be crucial for the successRead MoreSources of Finance4664 Words   |  19 PagesSection 1 – Sources of Finance There are 4 main types of business ownership: †¢ Sole trader †¢ Partnership †¢ Private limited company (Ltd) †¢ Public limited company (Plc) Each of these types of business needs to raise finance for capital investment Sole Trader This is a business that is owned by one person. Sole Traders are responsible for raising all the finance to set up and run the business. Usually a sole trader would be for a small business/ (businesses with a flatRead MoreInternal Sources Of Finance And Finance Essay2349 Words   |  10 PagesInternal sources of finance: Internal sources of finance are funds that arise from within the business such as profits as they can be retained to grow the finance and selling assets. Retained profit Retained profit is the money kept in the company after paying dividends. It is used to reinvest in the business or to pay debt. It comes by a business after it makes profit and is kept separate to use in other ways such as expanding the business by developing new buildings or certain areas, buying new