BUSINESS FINANCE TYPES

AND SOURCES

GROUP MEMBERS:
RAJA HUZAIFA
MUHAMMAD SOHAIB
SAJAAD AHMAD
GOHAR SANA
Types of Business Finance

1. Short Term Finance

2. Medium Term Finance
3. Long Term Finance
Short Term Finance

● Sources of Short term Finance

1. Trade Credit or Open Book Account
2. Advance from Customers
3. Cash Credit
4. Bank overdraft
5. Discounting of Bills
6. Bill of Lading
Short Term Finance

● Advantages of Short term Finance

1. Maintain uninterrupted flow of production
2. Able to make prompt payments to workers
3. Hold the stock of finished goods
4. Inventory of finished goods into receivables
Medium Term Finance

● Sources of Medium Term Finance

1. Commercial Banks
2. Debentures
3. Loans from Specialized Credit Institutions
Long Term Finance

● Sources of Long Term Finance

1. Equity Shares
2. Ploughing back of Profits
3. Issue of Right Shares
4. Debentures
5. Loans from industrial & Financial institutions
6. Leasing
Sources of Company Financing

● Sources of Business Funds

1. Owners Capital (shares)
2. Issue of Equity
3. Reserved profits
● Borrowed Capital is Interest Based
1. Debentures
2. Bank loans
3. Loans from Specialized Financial Institutions
4. Other Long Term Financial Institutions
Equity & Debt Financing

Equity Finance
● Advantages of Equity Finance
1. Permanent source of Capital
2. No Payment of Interest
3. Improved Ability to Face Business Recession
4. Freedom from Financial Worries of Borrowing
5. Earnings remain with the Firm
6. Liquidation of Assets
7. Repayment of Funds
8. Financial Base
9. Ability to Borrow
Equity & Debt Financing

Equity Finance

● Disadvantages of Equity Financing

1. Idle cash Balances
2. Over Capitalization
3. Weak Control
4. No advantage of Borrowed Capital
Equity & Debt Financing

Debt Financing
● Advantages of Debt Financing
1. Expansion of Business
2. Creditors have no Say
3. Profit
4. Tax Advantages
5. Urgent Current Expenses
6. Saving the Business from Dissolution
Equity & Debt Financing

Debt Financing
● Disadvantages of Credit Financing
1. Payment of Interest
2. Creditors can sue the Business
3. Losses
4. Attraction of Funds
5. Dissatisfaction among Shareholders
ANY QUESTION?