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SOURCES OF BUSINESS FINANCE 175 different basis viz., on the basis of often need short-term financing for the period, source of generation and the interim period between seasons. the ownership. A brief explanation of Wholesalers and manufacturers with these classifications and the sources a major portion of their assets tied is provided as follows: up in inventories or receivables also require large amount of funds for a 8.3.1 Period Basis short period. On the basis of period, the different sources of funds can be categorised 8.3.2 Ownership Basis into three parts. These are long-term On the basis of ownership, the sources sources, medium-term sources and can be classified into ‘owner’s funds’ short-term sources. and ‘borrowed funds’. Owner’s funds The long-term sources fulfil the means funds that are provided by the financial requirements of an enterprise owners of an enterprise, which may for a period exceeding 5 years and include sources such as shares and be a sole trader or partners or shareholders of a company. Apart debentures, long-term borrowings and from capital, it also includes profits loans from financial institutions. Such reinvested in the business. The financing is generally required for the owner’s capital remains invested in acquisition of fixed assets such as equipment, plant, etc. the business for a longer duration Where the funds are required for a and is not required to be refunded during the life period of the business. period of more than one year but less Such capital forms the basis on which than five years, medium-term sources of finance are used. These sources owners acquire their right of control of include borrowings from commercial management. Issue of equity shares banks, public deposits, lease financing and retained earnings are the two and loans from financial institutions. important sources from where owner’s funds can be obtained. Short-term funds are those which are required for a period not exceeding ‘Borrowed funds’ on the other one year. Trade credit, loans from hand, refer to the funds raised through commercial banks and commercial loans or borrowings. The sources papers are some of the examples of the for raising borrowed funds include sources that provide funds for short loans from commercial banks, loans duration. from financial institutions, issue of Short-term financing is most debentures, public deposits and trade common for financing of current credit. Such sources provide funds for assets such as accounts receivable a specified period, on certain terms and inventories. Seasonal businesses and conditions and have to be repaid that must build inventories in after the expiry of that period. A fixed anticipation of selling requirements rate of interest is paid by the borrowers Reprint 2026-27