Sources of business finance can be studied under the following heads:

(1) Short Term Finance:

Short-term finance is needed to fulfill the current needs of business. The current needs may include payment of taxes, salaries or wages, repair expenses, payment to creditor etc. The need for short term finance arises because sales revenues and purchase payments are not perfectly same at all the time. Sometimes sales can be low as compared to purchases. Further sales may be on credit while purchases are on cash. So short term finance is needed to match these disequilibrium.
Sources of short term finance are as follows:

(i) Bank Overdraft: Bank overdraft is very widely used source of business finance. Under this client can draw certain sum of money over and above his original account balance. Thus it is easier for the businessman to meet short term unexpected expenses.

(ii) Bill Discounting: Bills of exchange can be discounted at the banks. This provides cash to the holder of the bill which can be used to finance immediate needs.

(iii) Advances from Customers: Advances are primarily demanded and received for the confirmation of orders However, these are also used as source of financing the operations necessary to execute the job order.

(iv) Installment Purchases: Purchasing on installment gives more time to make payments. The deferred payments are used as a source of financing small expenses which are to be paid immediately.

(v) Bill of Lading: Bill of lading and other export and import documents are used as a guarantee to take loan from banks and that loan amount can be used as finance for a short time period.

(vi) Financial Institutions: Different financial institutions also help businessmen to get out of financial difficulties by providing short-term loans. Certain co-operative societies can arrange short term financial assistance for businessmen.

(vii) Trade Credit: It is the usual practice of the businessmen to buy raw material, store and spares on credit. Such transactions result in increasing accounts payable of the business which are to be paid after a certain time period. Goods are sold on cash and payment is made after 30, 60, or 90 days. This allows some freedom to businessmen in meeting financial difficulties.

(2) Medium Term Finance:

This finance is required to meet the medium term (1-5 years) requirements of the business. Such finances are basically required for the balancing, modernization and replacement of machinery and plant. These are also needed for re-engineering of the organization. They aid the management in completing medium term capital projects within planned time. Following are the sources of medium term finance:

(i) Commercial Banks: Commercial banks are the major source of medium term finance. They provide loans for different time-period against appropriate securities. At the termination of terms the loan can be re-negotiated, if required.

(ii) Hire Purchase: Hire purchase means buying on installments. It allows the business house to have the required goods with payments to be made in future in agreed installment. Needless to say that some interest is always charged on outstanding amount.

(iii) Financial Institutions: Several financial institutions such as SME Bank, Industrial Development Bank, etc., also provide medium and long-term finances. Besides providing finance they also provide technical and managerial assistance on different matters.

(iv) Debentures and TFCs: Debentures and TFCs (Terms Finance Certificates) are also used as a source of medium term finances. Debentures is an acknowledgement of loan from the company. It can be of any duration as agreed among the parties. The debenture holder enjoys return at a fixed rate of interest. Under Islamic mode of financing debentures has been replaced by TFCs.

(v) Insurance Companies: Insurance companies have a large pool of funds contributed by their policy holders. Insurance companies grant loans and make investments out of this pool. Such loans are the source of medium term financing for various businesses.

(3) Long Term Finance:

Long term finances are those that are required on permanent basis or for more than five years tenure. They are basically desired to meet structural changes in business or for heavy modernization expenses. These are also needed to initiate a new business plan or for a long term developmental projects. Following are its sources:

(i) Equity Shares: This method is most widely used all over the world to raise long term finance. Equity shares are subscribed by public to generate the capital base of a large scale business. The equity share holders shares the profit and loss of the business. This method is safe and secured, in a sense that amount once received is only paid back at the time of wounding up of the company.

(ii) Retained Earnings: Retained earnings are the reserves which are generated from the excess profits. In times of need they can be used to finance the business project. This is also called ploughing back of profits.

(iii) Leasing: Leasing is also a source of long term finance. With the help of leasing, new equipment can be acquired without any heavy outflow of cash.

(iv) Financial Institutions: Different financial institutions such as former PICIC also provide long term loans to business houses.

(v) Debentures: Debentures and Participation Term Certificates are also used as a source of long term financing.

Conclusion:

These are various sources of finance. In fact there is no hard and fast rule to differentiate among short and medium term sources or medium and long term sources. A source for example commercial bank can provide both a short term or a long term loan according to the needs of client. However, all these sources are frequently used in the modern business world for raising finances.

A certain amount of money is required to start or run any business. The entrepreneur has to work out where the threshold of starting a new venture is and what are his or her possible options to get access to funds sufficient for the requirements. The startup owner has to look over the investment that is eventually a break down into debt and equity forms. A debt is the sum of money you borrow from a lender and the payment of it involves interest on that investment along with the capital sum borrowed. This procedure of payment is stretched over certain time period .On the other hand an equity investment is the one which involves selling a portion of the company in return for cash or something else of value to an investor.

When it comes to business financing the first thing that comes to mind are bank loans. Although only a few fortunate can fulfill all the pre-requisites for a bank loan and are successful in acquiring such funds. One of the first organizations to be approached is almost always banks for funding as loans. Successful loan application for any one there are many that get rejected. The harsh reality as this is soon learned by the entrepreneur that it is actually not easy to finance the business form such loans by bank.

With banks realizing the phenomenal potential of small businesses funding the bank loans are gradually undergoing a change in the previous hard regulations obligatory to them. To woo small businesses even big banks have got the additional services and special programs launched. There are many businesses that don’t prefer a bank loan for startup funding. A report of a survey shows that, less than 15% of start-up capital is what such bank funds are comprised of. This percentage may go up to 40 % also for companies not more than 20 employees.

Well this does not states that bank funding is not good and you should not opt for it but also it is not the only source for business financing. Get money from individuals or groups of individuals is often easier option for start ups. And for companies which have a successful track record of are likely to find more investor, lenders and institutional lenders even for small organizations too.

Private small business funding companies who provide both secured and unsecured business loans, angel investors, venture capitalists, grants, are also some other sources and alternatives to bank financing loans. Before opting for any a proper balance between the advantages and disadvantages should be analyzed to make any option more beneficial for your business.

Everyone has to decide for themselves what level of sacrifice and risk they’re willing to undertake in order to enjoy the satisfactions of working independently. Knowing some strategies for managing the risk of starting a business will allow you to make a well-informed decision.

Finding funding can be a lengthy process. Often some financial aid is needed, particularly for small companies in order to balance the outgoings while the business gets under way. For most people, anything involving money involves some level of fear. It’s important to acknowledge to yourself and to others that you are taking a risk, and you’ve decided it’s a risk you want to take. So consider the fear of starting a business natural, and find ways to manage it.

The obvious solution for this might be taking out a small business loan and there are a number of companies and banks offering this service. If you choose this option be wary of loan sharks and improper offers and pay attention to detail. This is not however the only funding opportunity for small businesses, besides which some new and un-established businesses will struggle to find a company prepared to lend without feeling confident about the return of their money.

Small business loans can be a particularly attractive option as financing for small business a new business because the federal government sponsors programs that make funding start up businesses a priority. Business loans from a bank or financial institution can be short, medium or long term loans. It’s important to undertake a thorough cost-benefit evaluation of your business loan options to identify the most suitable loan for your needs. For example a short term loan such as bank overdraft facility might be the most appropriate and cost effective option if you require finance to cover periodic cash-flow shortfalls in terms of your day-to-day operations.

A Medium term loan might be more suitable if you require business finance for a 3-10 year period to finance equipment, business expansion or development of new product lines. If you require finance to purchase land, property or other businesses in order to expand your operations to boost profit over a period of years, a long term loan will probably be the most suitable business loan option.

Banks, in particular, take a much more critical look at small business loan applications than many did in the past. They are requesting more background from potential borrowers in the way of tax returns both business and personal, financial statements and business plans. Regardless of which type of financing for small business you decide to pursue, your preparation before you approach a potential lender or investor will be critical to your success.

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It’s not all for looks though. Eco cups are also environmentally friendly. Because they’re reusable, your company will be helping to reduce a lot of waste by getting all of your employees involved in the eco cup movement. Their cups are BPA free and contain no toxins. They also have the added benefit of being microwave and dishwasher safe. KeepCups are perfect for customizable corporate gifts for your company or any business you’d like to impress.

Get information about Retirement Calculator for your best finance in the future!

The first of the “Baby Boomers”, defined by Wikipedia and most sources as those born between the years 1946 and 1964, are now starting to retire in large numbers. The ability to retire at any age implies you will have the financial means to cover expenses and still live comfortably, according to whatever expectations you may have for your retirement years. If retirement is sneaking up on you, are you ready for it? Even if it is 20-40 years in the future, is your savings plan on track to meet your future needs?

These questions can be quite complicated to answer, as they involve a lot more than just multiplying “savings x years to retirement”. When it is time to make those financial calculations, to find out if your plan is sufficient, there are a variety of different factors involved in the calculation. Some of the relevant factors include:

• Your current age
• When you plan to retire
• Your current income
• Current annual expenditures
• How much annual income you will need when you retire
• Rate of inflation
• Availability of Social Security

How do you know how much you need to save now, every year, in order to ensure you will have the total amount you need to live your retirement at the income level you desire?If you have an investment consultant or financial planner, what questions should you pose to them to make sure you are comfortable with your future retirement income?

A first step is to take stock of your current situation – how much are you putting aside now toward retirement and how much have you already saved? Once you have collected the applicable information about your current financial situation, you are ready to find a retirement planning calculator on-line. We find these calculators to be a great resource for pre-planning – and they are actually fun to use! The most effective calculators take the above factors into consideration and provide additional information about retirement planning as well.

A large number of online retirement calculators exist to help get you started on the path to determining how much you need to save now to be comfortable in your retirement.We found there are too many to count or accurately review. Some require you to provide personal contact information in order to use them. Many consider some, but not all of the relevant factors involved in retirement planning. Some may consider the factors but keep them hidden from view; just calculated behind the scenes. Others ask for very detailed information about your current portfolio – too detailed for a starting “ballpark” calculation.

Here are some of our favorites:

Our favorite retirement calculator is provided by Texas Gulf Bank. Not only are all the relevant factors taken into consideration, but TGB also includes a glossary of terms to help you understand the information that goes into the calculation.

Ultimate Retirement Calculator at FinancialMentor.com – a bit more complicated to use, but does provide good information as a baseline for retirement.

Armed with the information gleaned from playing with the calculators, you’ll be well on your way to a comfortable, secure retirement – or at least you’ll be further along the path of defining that elusive “retirement” goal and intelligently talking to your local banker or investment professional. Whether you are a Baby Boomer nearing retirement age or just starting your life as a working adult, it’s never too early – or too late – to start thinking, planning and saving for your retirement!