Long term Short term

Sources of Finance

External Sources of Internal Sources of

Finance Finance

1. Retained profits
2. Asset sales
3. Stock reduction
4. Limiting credit
Government Borrowing from Banks Borrowing from Public Other Sources of External 5. Reducing the volume of
Finance Finance transactions/activity
1. Short-term loans (overdraft 1. Issuing of shares 6. Drawing from reserves/provisions
1. Tax exemption withdrawals) 2. Issuing of bonds 1. Extending credit from suppliers 7. Renting assets/production lines to
2. Development Fund 2. Medium/Long-term loans 2. Credit Purchase others
3. Free Zones -------------------------------------- 3. Financial vs Operating Leasing 8. Barter
4. Legal & Financial aids 3. Discounting vs. Factoring 4. Outsourcing 9. Increasing efficiency of operations
4. Mortgage vs. real estate finance 5. B.O.T 10. R & D (that leads to decrease
5. Securitization 6. Merging/Acquisition costs)
7. Crowd Funding 11. Franchise
Factors that affect the choice of an appropriate source of 8. Accelerators/Incubators
9. Borrowing from sister
finance companies
10. Venture Capital
1- Availability of the source
2- Cost of the source
3- Need for working capital (golden rule)
4- Urgency for source of finance
5- Leverage rate (the extent of dependency on external debt to finance business
operations)
6- The ratio of fixed assets to current assets