Source of finance can be simply explained as follows −
LONG TERM | MEDIUM TERM | SHORT TERM |
---|---|---|
BASED ON TIME | ||
Equity shares | Preference shares | Trade credit |
Preference shares | Debenture/Bonds | WC loans |
Internal accruals |
| Fixed deposits (period of 1 year) |
Debentures/bonds | Advances from customers | |
Term loans | Creditors | |
Venture funding | lease finance | Payables |
Asset securitization | Hire purchase finance | Factoring services |
International finance | Bill discounting |
Owned | Borrowed |
---|---|
Based on ownership and control | |
Equity capital | Loans from Financial institutions Commercial loans |
Preference capital | |
Retained earnings | |
Convertible debentures | Debentures |
Venture fund/ private equity |
Internal | External |
---|---|
Based on source generation | |
Equity capital | Retained profits |
Preference capital | Reduction in working capital |
Retained earnings | Sale of assets |
Convertible debentures | |
Venture fund/private equity |