funding sources.pptx
- 2. INTRODUCTION • Finance is the lifeblood of business concern • Arrangement of the required finance to each department of business concern is highly a complex one and it needs careful decision. • Sources of finance mean the ways for mobilizing various terms of finance to the industrial concern.
- 3. Classification of sources of fund SOURCES OF FINANCE Period Long-term sources (5-10) ● Equity Shares ● Preference Shares ● Debenture ● Long-term Loans ● Fixed Deposits * Venture capital Short-term sources ● Bank Credit (w.c) ● Customer Advances ● Trade Credit ● Factoring ● Public Deposits ● Money Market Instruments (CP) Ownership ownership source ●Shares capital, earnings ● Retained earnings ●Surplus and Profits Borrowed capital ● Debenture ● Bonds ● Public deposits ●Loans from Bank and Financial Institutions. Generation Internal source ●Retained earnings ●Depreciation funds ● Surplus External sources ● Share capital ● Debenture ● Public deposits ●Loans from Banks and Financial institutions 9/29/2018 12:14 PM Sources of finance 3
- 4. SOURCES OF FINANCE ▶ Issuances of shares. ▶ Loans from commercial banks. ▶ Debt financing ▶ Financial Institutions.
- 5. ISSUANCE OF SHARES ▶ The captial generated by issuance of shares is known as share capital. The capital of a company is divided into small units called shares. Each share has its nominal valve. ▶ There are two types of shares which are normally issued by a company. 1. Equity shares. 2. preference shares. ▶ The money raised by issue of equity shares is called equity share capital. ▶ The money raised by issue of preference shares is called preference share capital.
- 6. DEBT FINANCING ▶ In debt finance, debentures are issued in different denominations at different interest rates. ▶ The investors in debentures are paid certain fixed percentage of interest. The investor are not becoming the owner of the business, so there is no dilution of control. ▶ Debentures are preferred as more easy way to get finance although it is a burden on the company. ▶ In debentures the interest is considered as expense compared to profit after tax.
- 7. LOANS FROM COMMERCIAL BANKS ▶ They provide funds for different purposes ass well as for different time periods. ▶ Banks provides different types of loans to business for different sizes and of all sizes and in many ways, like overdrafts, term loans, cash credits, purchase/discounting of bills, and issue of letter of credit. ▶ The rate of interest charged by banks depends on various factors such as the characteristics of the firm and the level of interest rates in the economy.
- 8. FINANCIAL INSTITUTIONS ▶ Various central government and state government financial institutions are major sources of finance for a new venture. These institutions are providing funds to the entrepreneurs based on their strength of the business models. ▶ The most difficult part is to satisfy them in terms your business model in terms of technical, economical, commerical, managerial ability of your proposed management, marketing and every aspect of the business. ▶ Based on reviewing all facts of the business the authority provides the fund at certain percentage of fixed interest rates.