Escolar Documentos
Profissional Documentos
Cultura Documentos
Sources of Finance
(PhD, MBA)
Department of Marketing
Dhaka University
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Sources of finance
Internal sources:
External sources:
Sale of Assets
Debt Collection
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Easy to access
No money to pay back
No interest to pay
Disadvantages
Sole proprietorship
Partnership
Fund is collected by all or few partners
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General Reserve
Sinking Fund
Disadvantages
No access for new
firm
Limited fund
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Advantages
Advantages
No interest to pay
Disadvantages
No access for new
firm
Limited fund
Outstanding
expenses not met in
time can be used as
an internal source of
finance
Disadvantages
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A MT source of finance
comes in from selling
off fixed assets that are
no longer needed
Advantages
Disadvantages
Unlikely to have
surplus assets to sell
Can be a slow method
of raising finance
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Advantages
Disadvantages
This is a ST source of
finance
No additional cost, a
part of the businesses
normal operations
There is a risk that
debts owed can go
bad and not be repaid
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Bank Loan
Hire Purchase
Overdraft
Mortgage
Trade Credit
Government Grants
Venture Capitalists
Business Angles
Other Sources
Additional Partners
Share Issue
Leasing
Advantages
Money is borrowed
from a bank at an
agreed interest rate
over a period of time
and is paid back in
instalments.
Disadvantages
Can be expensive due
to interest payments
Bank may require
security on the loan
Only ST financing
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Advantages
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The overdraft is
flexible
Used on a day-to-day
basis to cover the
cash needs
Disadvantages
Pre-arranged with a
banking/lending
institution
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A source of finance
suitable for a
partnership
business
Advantages
Disadvantages
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A L-T source of
finance suitable
for a limited
company
Involves issuing
new stock to
public or right/
bonus stock to
existing
stockholders
Advantages
Never repaid
No interest is payable
Disadvantages
Disadvantages
A MT source of
finance
Can be expensive
Advantages
Involves paying an
initial deposit and
regular payments for a
set period of time
After all repayments
have been made the
business owns the
asset
Use of up-to-date
equipment immediately
Disadvantages
A MT source of
finance
Expensive financing
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A loan secured on
property repaid in
instalments over a
period of time
typically 25 years
Advantages
Advantages
Use of up-to-date
equipment
Payments are spread over
a period of time
After all repayments, the
business will own the asset
Trade credit is
summed up by the
phrase: buy now
pay later
Easy financing
Good for CF
No interest charged if money
is paid within agreed time
If business fails
repayments, the property
could be repossessed
This is a S-T
source of finance
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Government
organisations offer
grants to
businesses, both
established and new
Usually certain
conditions apply,
such as where the
business has to
locate
Advantages
Dont have to be
repaid
Disadvantages
Wealthy, professional
investors invest in
start-up businesses
Look for investment
opportunities in fast
growing businesses
Certain conditions
may apply e.g.
location
Advantages
Disadvantages
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The amount
required
The cost of
the money
Choosing a
funding method
Loss of
control
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