Sources Of Finance

  1. Short-Term (<1 year< 1\,\text{year})

    • For day-to-day running costs:

    • Bank Overdraft: Spend more than what is in your account; quick, but comes with high fees.

    • Trade Credit: Buy items today and pay the supplier later (usually 30–90 days30\text{--}90\,\text{days}).

    • Invoice Factoring: Sell unpaid customer bills to a finance company to get cash right away.

  2. Medium-Term (1–5 years1\text{--}5\,\text{years})

    • For vehicles, machinery, or equipment:

    • Bank Loan: Borrow a fixed lump sum and pay it back monthly with interest.

    • Leasing: Rent equipment long-term without ever owning it to keep costs low upfront.

    • Hire Purchase: Pay in monthly parts and fully own the item after the final payment.

  3. Long-Term (>5 years> 5\,\text{years})

    • For buying property or funding big growth:

    • Retained Profit: Spend saved business profits; no debt and zero interest.

    • Share Capital: Sell company shares to investors; no debt to repay, but gives up partial ownership.

    • Commercial Mortgage: A long loan (15–25 years15\text{--}25\,\text{years}) specifically to buy land or buildings.

    • Debentures / Bonds: Fixed-interest loans from private lenders, usually backed by company assets.