For entrepreneurs sources of finance are the vastest area, perhapsit is the hardest of all the hard work or efforts.
Meanwhile it is known thatthere are different ways of financing which the company can choose from; themain challenge is choosing the right source at the right time and right mixtureof finance. The process of choosing appropriatesource of finance needs extent analysis of every source available, for evaluatingand comparing different sources of finance the company needs to know differentcharacteristics of the each source. For classification of sources of finance there are different characteristics,on the basis of time, on the basis of ownership and control and on the basis ofsource of generations lets study them in more details.ü ONTHE BASIS OF TIME-PERIOD Companies required sources of finance based on the time period,these periods can be categorised in following three waysLONGTERM SOURCE OF FINANCE These are the sources which the company can raise funds for thelong period of time more than five years like maybe for ten years, twenty yearsor based on the factors. For Building, land, plant and machinery etc. companiesneeds long term source of finance.
Some part of working capital which will bewith the business is also finance with the longer term sources Some examples of long term sources of finance Debenture Longterm loans from banks, government and financial institutes Sharecapital Retainearnings Preferencecapital Assetssecuritization MEDIUMTERM SOURCES These are sources which companies needs for medium terms like threeto five years and they are mainly used in two circumstances One when long termsources of finance is not available for time being and secondly when some expendituresneeds to written off over period of three to five years like deferred revenueexpenditure for example advertisements.ü Examples of Medium Term Sources Mediumterm loans from commercial banks, government or any financial institutes Leasefinance Debenture Hirepurchase finance