All businesses need to raise finance to run a businessAll businesses need to raise finance to run a

Jun 27th, 2015
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SOURCES OF BUSINESS FINANCE Why is there a need for finance in a business?  Setting up  Expansion  Day to Day running

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2.0 Sources of FinanceFinance is essential for a businesss operation, development and expansion. Finance is the core limiting factor for most businesses and therefore it is crucial for businesses to manage their financial resources properly. Finance is available to a business from a variety of sources both internal and external. It is also crucial for businesses to choose the most appropriate source of finance for its several needs as different sources have its own benefits and costs. Sources of financed can be classified based on a number of factors. They can be classified as Internal and External, Short-term and Long-term or Equity and Debt. It would be uncomplicated to classify the sources as internal and external.2.1 Internal sources of financeInternal sources of finance are the funds readily available within the organisation. Internal sources of finance consist of:Personal savingsRetained profitsWorking capitalSale of fixed assets2.1.1 Personal savingsThis is the amount of personal money an owner, partner or shareholder of a business has at his disposal to do whatever he wants. When a business seeks to borrow the personal money of a shareholder, partner or owner for a businesss financial needs the source of finance is known as personal savings.2.1.2 Retained profitsRetained profits are the undistributed profits of a company. Not all the profits made by a company are distributed as dividends to its shareholders. The remainder of the profits after

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