Sources of Finance : (Short Term and Long Term
When looking at this area, there are a number of things you need to think about. First of all, you need to consider why the business needs to raise finance. Finance can be needed for a variety of different reasons, which will have an effect on what the most appropriate sources of finance will be.
Finance could be needed for:
· Starting up a new business
· Coping with a cash flow problem
· Buying some new equipment or machinery
· Setting up a new plant
· Buying another business (a takeover or acquisition)
· Coping with debts
· Short term Finance
· This refers to money that is needed to finance activities that are usually going to last less than one year. Such finance is generally used to manage the day to day operations of a business.
Long term Finance This refers to finance that is needed over a long period of time - certainly over a year and possibly over many years. It tends to be used for financing the setting up of businesses and for expansion of existing businesses.
· Short term sources of finance:
o Bank overdraft
o Trade Credit
o Leasing
o Bank loans
o Credit cards
· Long term sources of finance:
o Bank loans
o Share capital
o Debentures
o Asset sales
o Venture capital
o Retained profit
o Owners' capital
o Government, local authority or EU grants
When looking at this area, there are a number of things you need to think about. First of all, you need to consider why the business needs to raise finance. Finance can be needed for a variety of different reasons, which will have an effect on what the most appropriate sources of finance will be.
Finance could be needed for:
· Starting up a new business
· Coping with a cash flow problem
· Buying some new equipment or machinery
· Setting up a new plant
· Buying another business (a takeover or acquisition)
· Coping with debts
· Short term Finance
· This refers to money that is needed to finance activities that are usually going to last less than one year. Such finance is generally used to manage the day to day operations of a business.
Long term Finance This refers to finance that is needed over a long period of time - certainly over a year and possibly over many years. It tends to be used for financing the setting up of businesses and for expansion of existing businesses.
· Short term sources of finance:
o Bank overdraft
o Trade Credit
o Leasing
o Bank loans
o Credit cards
· Long term sources of finance:
o Bank loans
o Share capital
o Debentures
o Asset sales
o Venture capital
o Retained profit
o Owners' capital
o Government, local authority or EU grants