Updated: Feb 22
Every business needs financing
These finances can come from various sources, either internally or externally. Which source would depend on the circumstances of the business, such as if it is a
Startup or an established business,
Large or a small firm,
Profitable or not
What will it be financing
Amount of fund needed
Internal sources would mean finances would have been from
The sale of asset(s)
Shareholders' funds, or
Retained profits, and
Personal financing (for sole trader and partnership)
These personal financing could be from the personal savings of the business owner or borrowings from family or friends. These amounts are usually small.
Should it be from an external source, financing could be short-term or long-term. This is determined by the amount borrowed. A large amount would likely require long-term (more than 1 year) to pay of debt, while a smaller amount could be repaid within a year (short-term). It is also determined by how fast the borrower can repay.
The amount required is determined by the purpose of the financing or what the funds will be used for. In general, these are what financing is needed for.
Licences or fees
Operating assets such as transport
Materials or machines for production
Research and development
New machines or equipment
Setup operation abroad
Repay short-term expanses such as working capital