Sources of Business Finance 1

Sources of Business Finance

Sources of enterprise finance may be studied below the subsequent heads:

(1) Short-Term Finance:

Short-time period finance is needed to satisfy the current desires of commercial enterprises. The current wishes may consist of fees of taxes, salaries or wages, repair fees, price to a creditor, and so forth. The need for short-period finance arises because income revenues and buy payments are not perfectly identical at all times. Sometimes, income may be low in comparison to purchases. Other income can be based on credit score, even as purchases are made on coins. So, a brief period of finance is wanted to match that disequilibrium.

Business Finance

Sources of short-period finance are as follows:

(i) Bank Overdraft: Bank overdraft is a very broadly used source of enterprise finance. Under this, a customer can draw a certain sum of money over and above his original account balance. Thus, it’s far more accessible for the businessman to fulfill short-term surprising prices.

(ii) Bill Discounting: Banks may discount bills of exchange. This gives the bill holder cash, which can be used to finance immediate needs.

(iii) Advances from Customers: Advances are often demanded and received to confirm orders. However, they are also used to finance the operations vital to executing the job order.

(iv) Installment Purchases: Purchasing on installment offers extra time to make bills. The deferred payments are used as a source of financing, and small charges are to be paid immediately.


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