Sources of Finances:
Every business needs finance. There are a number of financial support sources firms can use to obtain funding. Some sources of finance are short term, which means they have to be paid back within a year whilst others are long term; this means they can be paid back over many years.
Internal sources of finance are funds found inside the business. EG, profits can be kept back to finance expansion. Alternatively the business cans sell assets (items it owns) that are no longer really needed to free up cash.
External sources of finance are found outside the business. EG, banks.
Sources of external finance to cover the short term include:
• An overdraft facility, where a bank allows a firm to take out more money than it has in its bank account.
• Trade credits, where suppliers deliver goods now and are willing to wait for a number of days before payment.
• Factoring, where firms sell their invoices to a factor such as a bank. They do this for some cash right away, rather than waiting 28 days to be paid the full amount.
Sources of external finance to cover the long term include:
• Owners who invest money in the business. For sole traders and partners this can be their savings. For companies, the funding invested by shareholders is called share capital.
• Loans from a bank or from family and friends.
• Debentures are loans made to a company.
• A mortgage, which is a special type of loan for buying property where monthly payments are spread over a number of years.
Here is a helpful PowerPoint about all the different sources of finance. http://www.docstoc.com/docs/55448428/Different-Sources-of-Business-Finance---PowerPoint
