The sources of business finance are the ways a business can obtain money to fund its activities.
There are different types of sources, depending on the ownership, time period, and control of the funds. Some common sources of business finance are:
Retained earnings: The profits that a business reinvests instead of distributing to the owners.
Equity: The money that a business raises from selling its shares to investors.
Term loans: The money that a business borrows from a bank or a financial institution for a fixed period and interest rate.
Debt: The money that a business borrows from various sources, such as bonds, debentures, or commercial papers.
Letter of credit: A document that guarantees the payment of a buyer to a seller, issued by a bank or a financial institution.
Working capital loans: The money that a business borrows to finance its day-to-day operations, such as inventory, accounts receivable, or payroll.
Venture funding: The money that a business receives from investors who are willing to take high risks in exchange for high returns.
Each source has its own advantages and disadvantages, depending on the cost, availability, and flexibility of the funds. A business should choose the source that best suits its needs and objectives.
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