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Sources of business finance
Why businesses need money
They are just starting and need to buy premises and
equipment.
They have an opportunity to introduce a new
product or service.
A major item of equipment or building needs to be
brought up to date.
Businesses need extra money at times because:
SOURCES OF FINANCE
A business can raise funds from various sources.
Each of the source has unique characteristics, which
must be properly understood so that the best available
sources of raising funds can be identified.
there is not a single best source of funds for all
organizations.
The amount
required
Factors affecting the choice of
funding
The length of time
for which the money
is needed
The risk
involved
The cost of
the money
Loss of
control
Advice
available
Choosing a
funding method
Factors affecting the choice of the
source of funding
Financial strength and stability of
operations.
Form of organization and legal status.
Purpose and time period.
Effect on credit worthiness.
Flexibility and ease.
Tax benefits.
Sources of Finance
Sources of finance can be classified into:
Internal sources (raised from within the organisation)
External (raised from an outside source)
Internal Sources
Owner’s investment (start up or
additional capital)
