why need finance in business and their different sources
TRANSCRIPT
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Why Business Needs Finance and What are the Available
Sources of Finance
Presented By
Rakesh Kumar
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Meaning of Business Finance
Money required for carrying out business activities is called business finance.
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Businesses need money for…
For starting up Everyday bill payments
Expansion
Internal Growth
Take over bid
Replace machinery/equipment
Why Do Businesses Need Finance
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Why Do Businesses Need Finance?Starting Up – Buildings, machinery, raw materials and office equipment
WORKING CAPITAL – Short term finance required for the day-to-day running of a business
Unforeseen Events – Sudden decline in sales, large customer fails to pay on time or pay expenses quickly.
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Sources of Finance
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Internal Sources of Finance
INTERNAL SOURCES OF FINANCE – Finance which is raised internally, it does not increase the debts of the business.
Examples:Retained profitPersonal savings Sale and leasebackSale of unwanted assets
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External Sources of Finance
EXTERNAL SOURCES OF FINANCE – Finance provided by people or institutions outside the business, creates a debt that will require payment. Examples: Loans Overdraft Shares Debentures
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Sources of FinanceFinance sources may be internal or external, but they may also be short, medium or long termShort Term: Finance the business for up to 1 year.Medium Term: Finance the business for up to 5 years .Long term: Finance the business for more than 5 years.
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Short term FinanceBank overdraft facilityTrade credits Factoring Loans Creditors.
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Medium term Finance
LeaseHire purchase Medium term loan
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Long term FinanceSharesDebenturesLong term bank loansMortgageGrantsAdditional partners
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Questionnaire 1.what is the primary source of short, medium & long credit? 2.Source of finance depends on ? 3.How to raise capital in business? 4. Are personal loans considered income? 5.what is the difference between shares & debentures?
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