Sources of Business Finance.
The market trends in business today requires business to have a positive cash flow so that it can be able to remain relevant in the business due to fluctuating trends in the market. In order to have positive cash flow every business has to come to terms and plan quite well for some issues, when these factors are well catered for then the business will tend to have positive cash flows hence sail in the markets comfortably.
In order to determine how well can a business be able to finance its own investment one ought to understand the current financial position of the business that is, making a determination of the funds available less the owners’ equity. Determining the costs that the business has to incur whether making sales or not, is yet another important aspect one has to consider in order to have favorable cash flow statements. Despite considering the above options, one has to know that business cash flow will be determined by the uniqueness of the business, that is, maybe business size, owner resources, or even business module.
Once one gets this information correctly will have to find some sources from which he will be able to finance the said business. Depending on the nature or need of one’s business there are some options one can choose as ways of financing his business, namely, short-term finance, medium-term finance, and long-term finance. For financing needs that are current and would require urgent care one should look for short-term business financing, commonly it will be used to cater for expenses like un budgeted repairs and so on. Among the examples of short-term business financing is the bank overdraft, whereby the business will be allowed to draw more money than what is actually in the account, this kind of financing is easy and does not have high rate of return.
Medium term financing on the other hand are aimed to finance a business that may be willing to do some re-engineering, or acquiring a new plant or machinery, mostly this kind of funding will require about one to five years to finance . Financial institutions and commercial banks are among the best examples of medium-term business financing. In light that for a higher chance of the financier to get his fund back they must check the creditworthiness of the client, however, there are some changes in the financial market that there are some institutions that do not necessarily require that. However in order for this to work out, one needs to visit the said financial institutions and understand the policies laid down for one to be financed yet with poor creditworthiness.