Acquiring substantial funds to help it grow and expand is one of the most crucial requirements for any organisation. The most common sources of business finance are lines of credit, working capital loans, business loans, etc. All of these sources can be utilised in diverse situations and classified on time period, ownership and source of generation.
You need to decide the right source as it is an essential decision for the future prospects of your business. In case you use the wrong source then the cost of funds increases which ultimately impacts the project or business operation under concern.
Sources of business finance
The two major sources that meet the financial requisites of any enterprise are –
- Owners fund
It is known as owned capital which comprises the funds contributed by the owners along with the profits reinvested in the business. You can raise owner’s funds by investing the profits.
- Borrowed fund
This consists of the amount which is raised by availing loans or credit. It is known as the borrowed capital and can be procured from NBFCs and other specialised financial institutions. Instant business loan is one of the most preferred choices for borrowed funds.
As per time duration, the sources of business finance are classified as follows –
Short term finance
The money raised for a period of less than 3 years is short term finance. This short term capital is generally needed to finance overhead expenses of a business such as utility bill payments, wages, unforeseen events, increasing inventories of raw materials and other related costs. The different sources here are instalment credits, discounting bills, bank overdrafts, etc.
Medium term finance
These sources of business finance are needed for a period from 3 to 5 years. These are usually required for the modernisation and repairing of machinery, renovations and adopting new methods and carrying advertisement campaigns. Loans from specialised credit institutions are included within it.
Long term finance
These sources of finance refer to funds which are needed for business investments for a period exceeding 5 years. The long term sources of finance are required for purchasing fixed assets like machinery, land and building, expansion of business, etc. The different sources included under it are leasing, loans from financial institutions, etc.
Finance your business for growth and development
The most common type of source used by the majority of businessmen is the borrowed funds. These funds are provided with certain terms and conditions for a specific time period. You get to repay the loan with interest within the loan tenor.
If you wish to avail the most viable financial source for your business then opt for an instant business loan. Many NBFCs and financial institutions offer small business loans that fund your business and helps in its advancement.
These credits can help grow your business expansion project and make it reach new heights as it provides an ample and affordable source of finance. Conduct a thorough market research and select the ideal option for your organisation.