Guide to Settling for a Source of Finance
There are a number of factors that are to be taken into account as you choose a source of finance. The following is a quick review of some of these important things to look into.
The much that you require is one of the things that you are to take into account as you settle on your preferred source of funds. As a matter of fact, there are some sources of funds that aren’t as equipped to get you the vast amounts that you may be in need of. For instance, bank overdrafts may be a source of funds yeses, but they do have limits as to how much one can withdraw. In such cases where you may be in need of vast amounts of funds, it may be sensible for you to think of going for the other alternative sources of funds such as debentures and share capital for instance. Likewise in cases where you are looking for small amounts such as to fund the day-to-day operations in a business, you may not be wise to fund for these by issuing new shares and instead for such, think of going for such sources like bank overdrafts.
Over and above this, you should as well take a look at the type of expenditure for which the fund are sought is another important factor to look at as you settle for the preferred source of finance you will be settling for at the end of the day. The long term sources of finance are generally best suited for the long term capital expenditures such as putting up a new plant or buying machinery for your operations. The short term sources would be good for such revenue issues such as payment of suppliers and the like.
As you settle for the right source of funds for your needs, you are to equally take into account the duration of time for which the fund are required. Where the funds are to be sued in projects that will see them tied over a long period of time, then it would be advisable for you to get them from the long term sources of finance. Opt for the short term sources of fund if you are looking for such funds to be used to fund for short term projects or needs in your business.
Your business size and capacity to borrow as well must be looked into as you settle for your preferred source of funds. In the event that you have such a large business that has grown and is as stable, then the larger sources of funds would be a good option for you to consider.