Sources of Funds for Businesses Assignment Example | Topics and Well Written Essays - 750 words - 1

Sources of Funds for Businesses - Assignment ExampleOwners investment - This is monetary resource generated from the sustainers savings, they atomic number 18 pillars of many small businesses. Owners investments are used in most cases where your business doesnt abide the assets to invest.Retained earnings-This source of funds is only obtainable for a business which has been in exploit for more than one year. Its an easy source of internal funding because this is when returns made are reinvested cover into the business. Its a medium to a long-term source of funds.Debt Collection - A business fag end increase its funding by collecting debts from their debtors, however not all business has debtors thus this institute is not applicable to all businesses. Its a short-term source of funding a business. wedge Overdraft-This is where a financial institution permits an entity to take out additional cash than it has in its savings. This means that a company may still write cheques even with no money in their accounts. Its a short-term source of funds and can be very expensive if used over weeklong extremitys (Gregoriou, Kooli & Kraussll, 2007).Hire Purchase-This technique allows a business to get assets without the necessity to pay larger amounts. Involves paying the first deposit and even payments for a certain period its a medium-term source of fundsMortgage-This is a credit held on the property, payable in installments over a particular period of time usually 25 years. After the final payment, a business will officially own the property. Its a long-term source of funds.Corporations can rely on both internal and out-of-door sources of funds because both have their advantages and disadvantages. However, many corporations today rely on external funds overdue to the following reasonsMost business needs finances to grow. Even companies with greater returns cannot rely only on reinvested earnings to finance their operations. Hence, a business is required to secu re bank loans, partner with other companies or any other way to raise external funds. (Smart, Megginson & Graham, 2010).