Options for Business Finance


Reasons for business finance might be studied under the next heads:

(1) Short-term Finance:

Short-term fund is needed to fulfill the existing needs of enterprise. The current needs can sometimes include payment of taxation, salaries or salaries, repair expenses, repayment to creditor and so on The need for short term financing arises because revenue revenues and purchase installments are not perfectly very same at all the time. At times sales can be reduced as compared to purchases. More sales may be with credit while acquisitions are on cash. Thus short term finance is necessary to match these disequilibrium.

Sources of short term economic are as follows:

(i) Bank Overdraft: Standard bank overdraft is very traditionally used source of business funding. Under this consumer can draw particular sum of money over and above his or her original account balance. Hence it is easier for that businessman to meet short-term unexpected expenses.

(ii) Bill Discounting: Costs of exchange is usually discounted at the banking companies. This provides cash for the holder of the costs which can be used to solutions immediate needs.

(iii) Advances from Consumers: Advances are mostly demanded and acquired for the confirmation regarding orders However , these are generally also used since source of financing often the operations necessary to carry out the job order.

(iv) Installment Purchases: Acquiring on installment offers more time to make transfers. The deferred transaction are used as a origin of financing small expenditures which are to be paid for immediately