Sources of Business Finance

Sources of business finance can be studied under the following heads:

(1) Short Term Finance:

Short-term finance is needed to fulfill the current needs of business. The current needs may include payment of taxes, salaries or wages, repair expenses, payment to creditor etc. The need for short term finance arises because sales revenues and purchase payments are not perfectly same at all the time. Sometimes sales can be low as compared to purchases. Further sales may be on credit while purchases are on cash. So short term finance is needed to match these disequilibrium.

Sources of short term finance are as follows:

(i) Bank Overdraft: Bank overdraft is very widely used source of business finance. Under this client can draw certain sum of money over and above his original account balance. Thus it is easier for the businessman to meet short term unexpected expenses.

(ii) Bill Discounting: Bills of exchange can be discounted at the banks. This provides cash to the holder of the bill which can be used to finance immediate needs.

(iii) Advances from Customers: Advances are primarily demanded and received for the confirmation of orders However, these are also used as source of financing the operations necessary to execute the job order.

(iv) Installment Purchases: Purchasing on installment gives more time to make payments. The deferred payments are used as a source of financing small expenses which are to be paid immediately.

(v) Bill of Lading: Bill of lading and other export and import documents are used as a guarantee to take loan from banks and that loan amount can be used as finance for a short time period.

(vi) Financial Institutions: Different financial institutions also help businessmen to get out of financial difficulties by providing short-term loans. Certain co-operative societies can arrange short term financial assistance for businessmen.

(vii) Trade Credit: It is the usual practice of the businessmen to buy raw material, store and spares on credit. Such transactions result in increasing accounts payable of the business which are to be paid after a certain time period. Goods are sold on cash and payment is made after 30, 60, or 90 days. This allows some freedom to businessmen in meeting financial difficulties.

(2) Medium Term Finance:

This finance is required to meet the medium term (1-5 years) requirements of the business. Such finances are basically required for the balancing, modernization and replacement of machinery and plant. These are also needed for re-engineering of the organization. They aid the management in completing medium term capital projects within planned time. Following are the sources of medium term finance:

(i) Commercial Banks: Commercial banks are the major source of medium term finance. They provide loans for different time-period against appropriate securities. At the termination of terms the loan can be re-negotiated, if required.

(ii) Hire Purchase: Hire purchase means buying on installments. It allows the business house to have the required goods with payments to be made in future in agreed installment. Needless to say that some interest is always charged on outstanding amount.

(iii) Financial Institutions: Several financial institutions such as SME Bank, Industrial Development Bank, etc., also provide medium and long-term finances. Besides providing finance they also provide technical and managerial assistance on different matters.

(iv) Debentures and TFCs: Debentures and TFCs (Terms Finance Certificates) are also used as a source of medium term finances. Debentures is an acknowledgement of loan from the company. It can be of any duration as agreed among the parties. The debenture holder enjoys return at a fixed rate of interest. Under Islamic mode of financing debentures has been replaced by TFCs.

(v) Insurance Companies: Insurance companies have a large pool of funds contributed by their policy holders. Insurance companies grant loans and make investments out of this pool. Such loans are the source of medium term financing for various businesses.

(3) Long Term Finance:

Long term finances are those that are required on permanent basis or for more than five years tenure. They are basically desired to meet structural changes in business or for heavy modernization expenses. These are also needed to initiate a new business plan or for a long term developmental projects. Following are its sources:

(i) Equity Shares: This method is most widely used all over the world to raise long term finance. Equity shares are subscribed by public to generate the capital base of a large scale business. The equity share holders shares the profit and loss of the business. This method is safe and secured, in a sense that amount once received is only paid back at the time of wounding up of the company.

(ii) Retained Earnings: Retained earnings are the reserves which are generated from the excess profits. In times of need they can be used to finance the business project. This is also called ploughing back of profits.

(iii) Leasing: Leasing is also a source of long term finance. With the help of leasing, new equipment can be acquired without any heavy outflow of cash.

(iv) Financial Institutions: Different financial institutions such as former PICIC also provide long term loans to business houses.

(v) Debentures: Debentures and Participation Term Certificates are also used as a source of long term financing.


These are various sources of finance. In fact there is no hard and fast rule to differentiate among short and medium term sources or medium and long term sources. A source for example commercial bank can provide both a short term or a long term loan according to the needs of client. However, all these sources are frequently used in the modern business world for raising finances.

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Congress Casts A Suspicious Eye On Russia’s Kaspersky Lab

Enlarge this imageEugene Kaspersky, founder and chief executive officer of Kaspersky Lab, at his office in Moscow past December. Kaspersky and his company have ties to the Ru sian govt but expre s that mustn’t be cause for i sue from the West, in which the firm’s cybersecurity software package is extensively made use of.Alexander Zemlianichenko Jr./Bloomberg through Getty Imageshide captiontoggle captionAlexander Zemlianichenko Jr./Bloomberg by means of Getty ImagesEugene Kaspersky, founder and chief government officer of Kaspersky Lab, at his office in Moscow final December. Kaspersky and his busine s have ties to your Ru sian govt but state that must not be bring about for i sue from the West, exactly where the firm’s cybersecurity software package is commonly utilised.Alexander Zemlianichenko Jr./Bloomberg by way of Getty ImagesOther than vodka, the Ru sian merchandise most familiar to People in Nick Foles Jersey america is probably the anti-virus program produced by Moscow-based Kaspersky Lab. Greatest Buy loads a few of the computer systems it sells with Kaspersky Lab computer software. The Federal Bureau of Prisons confirms to NPR that it works by using the company’s products. So do many condition and local government entities. (Kaspersky Lab is usually among NPR’s financial supporters.) But need to laws not long ago authorised by both of those the home and Senate Armed Companies Committees develop into regulation, the U.S. military could be barred from proudly owning or making use of any items created by Kaspersky. U.S. lawmakers have become progre sively wary of your Ru sian cybersecurity organization quite po sibly carrying out the need in the Kremlin. At a Could Senate Intelligence Committee listening to, six intelligence company chiefs seated in the witne s desk obtained put on the place about Kaspersky. “Kaspersky Lab application is utilized by, if not hundreds of hundreds, millions of Us citizens,” Florida Republican Marco Rubio informed the spy chiefs. “To every single of our witne ses I would just inquire, would any of you be at ease which has a Kaspersky Lab software package on your own computer systems?”"A resounding no from me,” replied Director of Countrywide Intelligence Dan Coats. “No,” reported National Safety Agency Director Admiral Mike Rogers. “No, Senator,” was CIA Director Mike Pompeo’s reply. “No, sir,” answered Acting FBI Director Andrew McCabe. “No, Senator,” chimed in Protection Intelligence Agency Director Lt. Gen. Vincent Stewart. Countrywide Geospatial-Intelligence Agency Director Robert Cardillo rounded out the replies: “No, sir.” Kaspersky’s Ru sian roots That refrain of noes arrives as no surprise to James Lewis, a cybersecurity specialist on the Heart for Strategic and Global Studies, a nonpartisan Washington security-i sues imagine tank. He notes that Eugene Kaspersky, the firm’s founder and major govt, researched at a KGB cryptography institute and served during the Soviet army. “And he neverthele s contains a corporation that operates out of Moscow,” Lewis adds. “So for an intelligence company, those are gonna be crimson flags.” Lewis states his very own uncertainties about Eugene Kaspersky grew following a dialogue which has a former Ru sian amba sador for the United Nations. “One working day [the amba sador] came around me and he mentioned, ‘In Ru sia we have saying that once you will be a member of protection service, you hardly ever go away.’ And that i mentioned, ‘Well, that is not genuine in the U.S.’ And he stated, ‘Well, it should be,’ ” Lewis remembers. “And then he walked off, and as he was walking away from me, I believed, what did he just convey to me about Eugene Kaspersky?” YouTube The Ru sian cyber empresario has mounted his very own counteroffensive. “I respectfully disagree with their opinion, and i am very sorry these gentlemen won’t be able to utilize the most effective software out there as a result of political explanations,” Kaspersky declared on Reddit’s Ask Me Nearly anything forum the same day the intelligence chiefs publicly turned down his company’s items. “Once again, I feel that because of political motives, these gentlemen you should not have a po sibility,” Kaspersky said, “and are deprived from your po sibility to employ the most beneficial endpoint safety available with no any true reason or evidence of wrongdoing from our side.” Kaspersky added he would “be very joyful to testify in front of the Senate” and remedy any concerns put to him. Within a independent a sertion emailed to NPR, a Kaspersky Lab spokesman turned down the legislation banning Pentagon usage of its solutions. “The company provides a 20-year historical past within the IT safety market of always abiding by the optimum ethical enterprise practices,” it reads partly, “and Kaspersky Lab believes it’s entirely unacceptable that the organization is being unjustly accused with out any challenging proof to back again up these false allegations.” The corporation didn’t make its CEO obtainable to talk to NPR, but Kaspersky did converse with the Affiliated Pre s after the armed forces panels moved towards his company. “We continue to be on the brilliant facet,” he instructed the AP, “and hardly ever, never, in no way go to the dim facet.” He also verified in that interview that there are previous Ru sian spies to the company’s staff and that FBI agents lately visited “some” Kaspersky staff within the U.S. The market perspective Some marketplace insiders who know the busine s properly stand by it. “Kaspersky, from the cybersecurity group, contains a really superior title,” states Rick Holland, who tracked the organization for a long time at Forrester Analysis. “I know numerous men and women that perform there, I know numerous People in america that function there, so they’re believed pretty extremely of,” Holland adds. “But provided the political weather, it is kind of not stunning that you’d see this come up once again.” And irrespective of his misgivings about Eugene Kaspersky, CSIS’s Lewis has absolutely nothing but praise for that enterprise alone. “They come up with a fantastic solution, they do fantastic analysis I use many of their investigation myself,” says Lewis. “So there isn’t any problem about the busine s or what it makes there’s i sues about the place it takes place for being headquartered.” Would Lewis use Kaspersky Lab items to guard his personal pc? “Uh, no,” he replies that has a chuckle. It can be not obvious the amount of company Kaspersky Lab could lose should the Pentagon utilization ban will take result. Eugene Kaspersky is anxious more than enough to have supplied to move more of his company’s exploration for the U.S. and make its supply code obtainable for U.S. officers to inspect. Kaspersky insists his company’s goods keep on being indispensable for shielding computers just about everywhere. “The globe is vulnerable,” he instructed a company convention last calendar year. “It’s a darkish age with the cybersecurity.”Correction July six, 2017 A prior model of this tale claimed: Ideal Purchase ma ses the laptop computers it sells with Kaspersky Lab software program. Best Obtain clarifies: Kaspersky Lab software package is among numerous anti-virus products it loads on the customer’s discretion.