Sources OF Business Finance
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- Rahul is a soul proprietor of the XYZ firm. He started the firm 6 years ago and earned a good amount of profit. Now he is planning to expand his business and take on some big projects, But he doesn't have enough funds for completing his plans. He wasn't been able to decide what should he do?
- He remembers of his college friend Rajan, who was now a well known Financial consultant. So, He visits Rajan's house.
- I have heard that you were looking for some investors and sponsors. Are you planning on converting XYZ firm into a partnership venture?
- Well I wasn't been able to meet my financial requirements alone so, I thought about it but I am not sure. I believe they are not stable, and also, I don't want to take responsibility for any debts incurred by my partners.
- So, do you have any investments in someone else business or investment in the form of FDs, Bonds, etc. ?
- Hmm.., then I would advise you to convert your firm into a company. Then you will be able to issue equity or preferential shares and even take loans from the public in the form of debentures.
- Well, I have some savings and investments but still, I don't want to put all of them into my business, as if there is a risk
- Alright then it's decided I will form a company. Can you also suggest some ways to arrange medium-term and short-term finance for the company.
- yes, I am familiar with these sources
- Other than these as you will now be forming a company, you may arrange funds from Financial institutions, Public deposits, Factoring services, Retained earnings, you may also issue short term debentures
- You might already know about the Bank loans, Trade credit, Bills receivables and payables, Bill discounting, Advances received from customers, Lease Finance, etc.
- I have also heard about commercial papers that we can loans from the public without any security. Is it true?
- Yes, its true, but only large banks or companies issue commersial paper to cover short-term financial obligations
- Of course! If you need to know anything else let me know :)
- Thank you so much Rajan for all your time. After I leave I will start working on your advice!
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