Sources of finance

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Sources of finance

  1. 1. SOURCES OF FINANCE
  2. 2. Financing, the sources of finance can be classified into three. They are; 1. Security financing or External financing 2. Internal financing and 3. Loan financing
  3. 3. 1. Security financing a) Ownership securities or capital stock b) Creditor ship securities or debt capital
  4. 4. a) Ownership securities Kinds of ownership securities i. Equity shares ii. Deferred shares iii. Sweat equity shares iv. Preference shares • cumulative preference shares • Non-cumulative preference shares • Redeemable preference shares • Irredeemable preference shares • Participating preference shares • Non-participating preference shares • Convertible preference shares • Non-convertible preference shares
  5. 5. b) Creditor ship securities •Debentures or Bonds Types of debentures; 1) Simple, Naked or unsecured debentures 2) Secured or Mortgaged debentures 3) Bearer debentures 4) Registered debentures 5) Redeemable debentures 6) Irredeemable debentures 7) Convertible debentures 8) Zero interest Bonds/ debentures
  6. 6. 9) Zero coupon bonds 10) First debentures and second debentures 11)Guaranteed debentures
  7. 7. 2. Internal Financing 1. Depreciation as a source of finance 2. Retained Earnings or ploughing back of profit
  8. 8. 3. Loan Financing I. Short term loans and credits II. Term loans including medium and long term loans
  9. 9. A .Short term loans and credits •Indigenous banker •Trade credit •Installment credit •Advances •Accounts receivable credit or factorings •Accrued expenses or outstanding expenses •Deferred incomes or Income received in advance •Commercial paper •Commercial bank •Public deposits
  10. 10. B . Term loans •Specialized financial institutional bank IDBI, Exim Bank, Industrial financial corporation of India, SIDBI, SFC’s, State industrial development corporations, LIC, GIC, UTI, Infrastructure Finance company Ltd etc •Term financing by commercial banks
  11. 11. Some other innovative sources of finance 1. Venture capital 2. Seed capital 3. Bridge finance 4. Lease financing 5. Euro-issues

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