A 10-Point Plan for Funds (Without Being Overwhelmed)
Different Ways of Obtaining Business Finance
If you are interested in knowing a bit of business, you better get to know some of the sources of the business finance. The first thing you need to know is about the short-term fund. When you talk about short-term fund; you see the amount of money that is required to pay for the immediate needs of a company. A business may need short-term funding to cater for taxes, wage payments or salaries, repair expenses among others.
The reason for that need is that sales and purchase payments are not always the same. You could also find some times when purchases are made cash, but sales are on credit. That will make a massive difference in purchases and sales. In this case the business owner is entitled to withdraw more money from the bank above what the company has deposited in the account. There are several sources of short-term finances which are as follows. You can have so many origins o short-term finance as listed below. The first source of finance is the bank overdraft. Bank overdraft is one of the causes that are widely used as a source of business finance.
The another source is when bills of exchange are cut by the bank. That provides the owner with cash to enable the business to run. Some time businesses may ask customers to pay in advance after confirming orders. That is what the corporations use at times when they want to execute the order. Another source that many firms use is the installment purchase. The enterprises use the deferred payments to pay other business needs. Sometimes businesses use the bill of lading to supply them with the money they need immediately by borrowing money from the bank.
Businesses also use trade credit as a source of finance for their immediate needs. In this situations businesses use credit to obtain raw materials, store and spare parts. That means that the businesses increase their bills payable to be paid in future. when the goods are paid the money is not paid immediately, and that money can be used for other needs.
There is also what is known as medium-term finance. This is a situation where the business needs to meet some medium-term like say five years requirements. In most cases businesses will need this kind of financing when they want to buy some equipment. Normally medium-term financing is obtained in financial institutions like the bank. In such financing the bank provides the money needed and then it is left to get it from the business in small monthly payments. The the firm also uses hire purchase to obtain the machinery. The hire purchase arrangement is where the industry pays some installments and is allowed to go with the equipment and to be settling in small amounts of monthly payments.