Main Sources of Finance

Short term

Trade credit

Overdrafts

Operating lease

Medium term

Debenture

Public deposit

Commercial banks

Financial institutes

Lease finance

Long term

Share capital

Retained earnings

Debits

Loans (more than 5 years)

Preference shares

1.1.1   Bank Loan

Banks and trust unions tender lending to bulky and mean businesses (Richard, 2008). When party take out a loan from a terrace, they have accessibility to a prepare amount of funds, but are bound to the escarp’s reimbursement terms and interest proportion. Interest is the fee for use the money, which hoard supported on how much of the loan is necessity and how long it will seize the employment to hire backing the reserve (Kenneth and Willinger, 2009).

1.1.2   Home Equity Line of Credit

Owner of the business can apply for the credit line if he or she has the house, the financial institutes can give credit line loan to make investment in business. Interest rate on credit line is always fluctuating so the business owners should monitor interest rate closely (Catherine, 2011).

1.1.3   Investor group

Many investor groups are also looking for such companies those require financial investors to overcome their problem (Olsen and Dietrich, 2011). These capitalists invest money in different projects from £500,000 up to 10 Million Pounds (Agnes, et al., 2010).

1.1.4   Personal Resources

Business owners can use their personal savings as an investment, they can use their retirement accounts as financial source, they can use their personal credit cards and overdraft limits (Juan, 2008).

1.1.5   Factors affecting financial decision

Basically these factors vary from one organization to another; micro economic and macroeconomic factors always influence the financial decision of an organization (Patricia, et al., 2011).

1.1.5.1           Microeconomic Factors

Organization size

Nature of business

Liquidity position

Pattern of ownership

Asset structure

Risk

1.1.5.2           Macroeconomic Factors

Government policies

State of economies

As the nature of the business is to build the hotel building and project managers want to convince investors for capital gain, so for this project risk will play an important role while making financial decision, financial managers always consider risk as an important factors because if the risk is high then the income level may not be stable (Ball and Watts, 2009). Liquidity position of a firm is the other factor that has influence on financial decision, if the firm has sound liquidity position means it has strong dividend policy (Mary, et al., 2013).

State of economy and government policies are the other two major factors that influence the financial decision in an organization. Structure of money market referred to as state of economy and tax rates, wages rates, wages hours, income tax, foreign exchange rate, interest rates are always designed by the legislation political parties, similarly licensing, securities and business policies are always affected by the government policies and economics policies and political stability is also concerned with economic stability (Michael, et al., 2011). If the risk is high the financial manager will design conservative policies because the shareholders seek profit in cash. If the interest rate is high then the cost will be high and the profit will be low. Tax rates, wages rate, working hours, exchange rates and income tax rate can be change and it will disturb the financial position of an organization so the financial manager consider these important factors into consideration while making financial decision (Patricia and Ilia, 2012).

Published by MALI

Writer is post-graduated in Computer science, Business Administration, Marketing and Innovation. He has 10 years of business academic research writing experience.

Leave a comment

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: