Discovering The Truth About Businesses

  • Posted on March 29, 2018 at 3:04 pm

Finance Sources that Can Help Finance Your Business

In today’s business world, it is good to be aware of the different finance sources that you can apply for the short term and long term activities of your business. Let us discuss here briefly some of these sources.

The present and current needs of your business can be accommodated through this first kind of business finance which is called the short term finance. Among the present needs of your business that need attending to are salaries and wages of your employees, tax payments, repair payments, payments to creditors, and others. Note that it is not all the time that the sales revenues and payments of purchases would come at the same time, and thus there is an imbalance of funds that need to be fulfilled through short term finance. It is not uncommon for some businesses to have higher purchases compared to the inflow of sales revenues, or sales on credit basis while you have to pay in cash your purchases to produce the goods or services, where in this case, short term finance would come in handy. You can have short term finance through bill discounting where you are given cash by banks to finance your present needs in operation. If you have orders and you confirm it, some clients can provide advances to your company so that you can produce their orders. Other sources of your short term finance is to loan against your documents, or you buy materials on the basis of installment.

If your business needs 1-5 years need of funds to balance, modernize or replace some equipment needed for the operation, you can avail of the medium term finance. For medium term finance, sources could come from commercial banks, buying on installment basis like hire purchases, going to financial institutions like industrial banks which can also give technical and managerial assistance, and other sources like debentures, TFCs and insurance companies.

For a more permanent basis and spanning around 5 years, a business can avail of the long term finance. Companies that need funds for their expansion, purchase of heavy modernization and structures to further develop the growth of the business would need this kind of finance. The sources of this kind of finance could come from equity shares which are subscribed to the public so that a capital base is generated, and this is true in large business organization. You can have also a long term finance from retained earnings coming from excess profits of the earnings of the company. If a company would like to acquire new equipment and without shelling out big cash, leasing could be another source of its long term finance. Companies can get long term loans not only from financial institutions but also through debentures and participation term certificates.

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