Various sources of raising funds for a business

Sources of Business Finance

To meet long term, medium term and short term financial requirements, the company may adopt the following sources of fund raising derives.

Methods for Raising Long Term Funds

1. Issue of shares.
2. Issue of Debentures.
3. Loan from specialized financial institutions.
4. Ploughing back of earnings (for existing companies)

Methods of Raising Medium or Intermediate Term Funds

1. Issue of preference shares.
2. Issue of debentures.
3. Public deposits.
4. Bank Loans (term loans)
5. Assistance from specialized financial institutions.

Methods of Raising Short Term Funds

1. Credit purchases or trade credit.
2. Bank overdraft.
3. Cash credit.
4. Customers’ advances.

Sources of Raising Borrowed Funds

1. Debentures.
2. Financial institutions.
3. Public deposits.
4. Commercial Bank

Sources of Raising Long Term Borrowed Funds

1. Debentures.
2. Financial Institutions.

Pattern of Capital Structure

A joint stock company is free to choose its capital structure at its own will. It may be either through:

(a) the issue of equity shares,
(b) the issue of both equity and preference shares, and
(c) the issue of equity and preference shares and also debentures.

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