This document discusses different sources of finance for businesses classified according to time period, ownership/control, and source of generation. Sources are classified as long-term, medium-term, or short-term depending on the time period for which funds are required. Sources also include owned capital like equity or retained earnings that are under the business's control, and borrowed capital from external sources like financial institutions or public debt. Internal sources of finance come from within the business like retained profits, while external sources come from outside the business like loans or share offerings. Choosing the right source of finance is important for business costs and feasibility.

1. By
Arjun M D
Robert jose
Unni Shaji
Kannan Shaji

2. What is finance?
Money used to purchase things the business needs
or want.
What is a source of finance?
It is a method of getting hold of the money you need.
Sources of finance are the most explored area
especially for the entrepreneurs about to start a new
business. It is perhaps the toughest part of all the
efforts.

3. There are various sources of finance classified on
the basis of :-
Time period
Ownership and control and
Source of generation

4. 1.ACCORDING TO TIME-PERIOD:
Sources of financing a business are classified based
on the time period for which the money is required.
Time period are commonly classified into following
three:
I..Long Term Sources of Finance
II.Medium Term Sources of Finance
III.Short Term Sources of Finance

5. I. Long Term Sources of Finance
 Share Capital or Equity Shares
 Preference Capital or Preference Shares
 Retained Earnings or Internal Accruals
 Debenture / Bonds
 Term Loans from Financial Institutes, Government, and Commercial
Banks
 Venture Funding
 Asset Securitization
 International Financing by way of Euro Issue, Foreign Currency
Loans, ADR, GDR etc.

6. II. Medium Term Sources of Finance
Preference Capital or Preference Shares
Debenture / Bonds
Medium Term Loans from
 Financial Institutes
 Government, and
 Commercial Banks
Lease Finance
Hire Purchase Finance

7. III. Short Term Sources of Finance
Trade Credit
Short Term Loans like Working Capital Loans from Commercial
Banks
Fixed Deposits for a period of 1 year or less
Advances received from customers
Creditors
Payables
Factoring Services
Bill Discounting etc.

8. 2.ACCORDING TO OWNERSHIP & CONTROL:
Sources of finances are classified based on ownership and
control over the business. These two parameters are an
important consideration while selecting a source of finance for
the business. On the basis of ownership & control sources of
finance are classified into two:
I.Owned Capital
II.Borrowed Capital

9. I. Owned Capital
 Equity Capital
 Preference Capital
 Retained Earnings
 Convertible Debentures
 Venture Fund or Private Equity

10. II. Borrowed Capital
Financial institutions,
Commercial banks or
General public in case of debentures.

11. 3.ACCORDING TO SOURCE OF
GENERATION:
According to the source of generation source of finance are classified
into two:-
I. Internal Sources
II. External Sources

12. I. Internal Sources
 Retained profits
 Reduction or controlling of working
capital
 Sale of assets etc.

13. II.External Sources
 Shares
 Debentures
 Public Deposit
 loans

14. CONCLUSION
Deciding the right source of finance is a crucial business decision taken
by top level finance managers. Wrong source of finance increase the
cost of funds which in turn would have direct impact on the feasibility of
project under concern. Improper match of type of capital with business
requirements may go against smooth functioning of the business.