Sources for Business Finance
Anyone who want to gain some knowledge about the industry, must also be prepared to earn a bit of business finance. The first thing you need to know is about the short-term fund. Short terms finances refer to cash that is needed to take care of the current needs of a business. Businesses ask for short-term finance when they have to take care of salaries wages, taxes and repair costs.
The the reason why a business may want to get short-term finance is because sales revenue and what has been purchased is not the same all the time. You will find a situation where purchases are made with money but the buyers you on loan. That will mean a lot in terms of the cash in the business. In This situation the business owner is allowed by the bank to remove more than what the business has in the bank. Many sources supply short-term fianc? as shown in the list below. One of the primary sources is the bank overdraft. Bank overdraft is one of the causes that are widely used as a source of business finance.
The other scenario is where bills are discounted at the bank. That can become a source of money to the owner of the bill immediately to cater to the pressing needs. There are other times when the business can also confirm some orders from customers and negotiate for advance payment. Sometimes that is what the companies use when they are supplying the orders. Other enterprises prefer utilizing the installment purchases. The enterprises use the deferred payments to pay other business needs. it is also needed at times to use the bill of lading as a source of business finance by obtaining loans 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 results in increasing the account payable of the business which is paid after some time. The bills are not paid immediately, and that gives an allowance to use the money for other purposes.
At times the businesses use the medium term finance. In this situation the business obtains money to cater medium-term fir needs like fur five years. In most cases businesses will need this kind of financing when they want to buy some equipment. The businesses will in most cases get such medium financing through the bank. The business obtains the money from the bank to buy the equipment and then it will be left to pay the bank in small installments. 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.