Without finance, you can’t establish your business. There are two types of finances required in modern business – short term finance and long term finance. The short term finance requirements are also known as working capital expenditures whereas long term finance requirements are known as fixed capital expenditures. Fixed or long term capital expenditures include purchasing fixed assets such as machinery, building, land, etc. Whatsoever, here we discuss about sources of long term finance.
Shares
Shares are issued by the companies in the stock exchanges for the retail and the institutional investors. By holding shares of a company, the shareholders garner ownership rights on the company. It has been historically proved that returns fetched by the equities market, outweighs all other kinds of investment.
Term loans from banks
A large variety of banks are there in the country which offer loans to the business houses. The term loans offers by these banks meet the finance needs of business.
Leasing
One of the popular sources of business financing is leasing. Leasing is an agreement between two parties – lessor and the lessee. In leasing, a lessor allows his/her capital assets to a lessee to use it. The lessee makes payments to the lessor as per the terms and conditions of leasing. The assets which are generally leased include office equipment, computers, car and commercial vehicles, plant and machinery etc. Leasing is very much similar to rental.
Hire purchase
This is like installment credit. Here, upon payment of the final credit installment, the ownership of the goods goes to the hire purchaser.
Retained earnings
A company may not be willing to distribute its entire profits among its shareholders in the form of dividends. The undistributed part of the profits is the retained earnings of the company. The company may use up its retained earnings as capital.
Venture capital
In recent times, venture capital firms have come to the fore to provide necessary funds to the businesses with huge potential. These types of funds are mainly used by the innovation-driven start up business entrepreneurs.
You, as the business owner, can explore one such ways so as to arrange the necessary finance for your business.
Tags: business