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Importance of sources of financing for businesses

Posted January 19, 2015 by RM to Finance 0 0
This post was written by a EasyFinance.com Community member. The views expressed below may not reflect the views of EasyFinance.com.

Of all the activities of a business, that of raising capital is the most important. The way to get that capital is what is called financing. Through the funding, you are given the possibility to companies to maintain a stable and efficient economy as well as to continue its business; this results, provide a greater contribution to economic sector to which they participate.

Sources of funding

Funding Sources Personal savings: For most businesses, the main source of capital comes from savings and other forms of personal resources. Often also often use credit cards to finance business needs. Friends and relatives: Private sources like friends and family are another option to get money, it is loaned interest free or at a low interest rate, which is very beneficial to start operations. Banks and Credit Unions: The most common sources of funding, banks and credit unions. Such institutions will provide the loan only if you show that your proposal is sound. Venture capital investment: These firms help companies that are expanding and / or growth, in exchange for shares or partial interest in the business.

Short-term financing

The Short-Term Financing, are comprised of Bank Loans, Commercial Loans, Lines of Credit, Notes, Commercial Paper ,Funding through Accounts Receivable Financing through Inventories. Here in Texas there is lots of financing source for your business or personal needs. You just need to check website for short term texas lenders.

Commercial Credit: This is the use that is made to the accounts payable of the company, the cumulative short-term liabilities, such as taxes payable, accounts receivable and inventory financing and funding sources. Advantages of trade credit are more balanced and less expensive means of obtaining resources. Advantage for companies is to streamline their business operations. Disadvantages of trade credit there is always the risk that the creditor does not cancel the debt, which results in a potential legal intervention. If negotiation is done on credit must be canceled deposit rates

Banking Credit is a type of short-term financing that companies obtain through banks which establish functional relationships. Its importance is that today is one of the ways most commonly used by companies to obtain financing. Advantages of a bank loan that the bank's flexibility shows in their conditions, leading to more likely to negotiate a loan that meets the needs of the company, this creates a better environment for trade and profit. It allows organizations to stabilize in case of trouble with respect to capital. Disadvantages of bank credit A very strict bank conditions can seriously limit the ease of operation and act against the profits of the company. Bank Loan carries a borrowing rate that the company must cancel sporadically to the bank for interest.

It is a negotiable instrument is an unconditional written, directed from one person to another, signed by the formula the note, in which they promise to pay his presentation at a date fixed or determinable future time, a certain amount of money together with interest at the rate specified in the order or bearer. The notes are derived from the sale of merchandise, cash loans, or conversion of a current account. The notes usually carried interest, which becomes an expense to the drawer and an income to the beneficiary.

Credit Line: It means always available money in the bank, but over a period agreed in advance. The credit is important, because the bank agrees to lend to the company up to a maximum, and within a certain period in time upon request. Although generally not a legal obligation between the two parties, the credit line is almost always respected by the bank and avoids negotiating a new loan every time the company needs to have resources.


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