Long Term Sources of Finance Essay - 2180 Words.
Sources of Finance for a Business For a business to successfully run, it must have sources of finance. These are methods of financing the running of the business, buying of stock and paying of workers. Small businesses and large businesses have different sources of finance. In this section, I will discuss the different sources of finance used by small and large businesses, and the advantages.
The Finance For A Long Term Finance Essay. 1046 Words null Page. Show More. The finance available for a long period especially three years and above is known as long-term. That is, repayment of the long-term finance can be done after three years. These finances are mainly used to purchase fixed assets. The popular long-term finance sources are owner 's capital, share capital, long-term loans.
As a result, how we choose to finance our company will have an impact on our independence as management. 4) Long term versus short term borrowing. When sourcing finance, we also need to consider whether we should obtain long term or short term funding. In many cases, it may be appropriate to match the type of funding to the nature of the asset.
Long-term sources of finance also include venture capital. This type of funding is usually provided by investors to small companies with a long-term growth potential. If you're just starting a business, you can invest venture capital of your own. However, it may not be enough to cover your expenses in the long run. The downside is that all the money may be lost if your business fails.
Implication of Long-Term Finance Sources Since long-term finance is taken for a period of more than five years and involves huge amounts of money so the sources of gathering it are also complex. Looking at the complexities, firms usually don't use just one source of finance but look for multiple sources; this is also because it is difficult to.
Long-term loans, on the other hand, are repaid out of the company's free cash flow from operations, not from the conversion of assets like a short-term loan. These loans are repaid over a period of years. A loan to invest in new equipment might be repaid over three-to-seven years. Real estate loan payments are spread over 15-to-30 years.
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