Sources of Finance
Finance is an important asset necessary for the growth of businesses. For entrepreneurs or large-scale business companies that want to start any business venture, they need finance to act as the starting capital. There are different sources of finance. Sources of finance are divided into either short-term, medium-term or long-term finance. For those who lack finance, commercial banks can offer both short-term and long-term loans depending on their needs. The type of finance that is necessary for the current requirements of the business is referred to as short-term finance. The immediate needs of the business may include working capital, repair expenses or payment of wages, salaries or taxes. The need for short-term finance comes up due to differences in sales income and purchase payments. Check out Bonsai Finance. Most of the time, the need for short-term finance arises when the sales are lower than purchases. In other time, the sales may be on credit when the purchases are made on cash. For this reason, short-term finances are required to balance the amount of sales and purchases. Some of the short-term finances are advances from customers, bank overdraft, bill discounting and so forth. Bank overdraft is a widely used source of business finance in which the clients withdraw a particular amount of money above the current account balance. Check this website

Medium-term finance is needed to satisfy medium-term needs of the business. It serves the business for a period of 1 to 5 years. These finances are primarily required for the replacement of plant and machinery, balancing as well as modernization. Medium-term finance can also be used for re-engineering of the business organization. Some of the sources of medium-term finance include commercial banks, financial institutions, and insurance companies and so on. Commercial banks are the main sources of medium-term finance. You can get loans from banks for various time periods by use of appropriate securities. Other financial institutions such as Industrial Development Bank can offer both medium and long-term finances. Long-term finances are necessary for permanent purposes and are taken for a period of more than 5 years. Most of the times, long-term finances meet structural transformations in a business or heavy modernization expenses. You can also secure long-term finances for new business plans or long-term developmental projects. Some of the long-term finances include equity shares, retained earnings, leasing and so forth. Equity shares are commonly used worldwide to raise long-term finance. The members of the public subscribe to the shares to create a large scale business. Later the shareholders get their equitable amounts of profit or loss to the business. It is up to you to determine the ideal source of finance that you need to cater for your financial needs. Click