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Sources of Finance | Types of Business Finance

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❶Whenever we bring in capital, there are two types of costs — one is the interest and another is sharing ownership and control. A businessman starting up a new business will invest venture capital of his own, but he will probably need extra funding from a source other than his own pocket.

Traditional Sources of Finance

Sources of Finance: Ownership Capital
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Medium term sources of finance are those that a company pays back in 1 to 5 years, and they include bank loans, hire purchases and leases. Some countries' governments also offer special programs that offer medium term financing for companies, such as the Enterprise Finance Guarantee program in the United Kingdom.

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Medium term financing sources can in the form of one of them: Preference Capital or Preference Shares; Debenture / Bonds; Medium Term Loans from Financial Institutes; Government, and; Commercial Banks; Lease Finance; Hire Purchase Finance; Short Term Sources of Finance. Short term financing means financing for a period of less than 1 year.

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Medium-term borrowing usually refers to a time frame between three years and five years. In reality, however, the term of a financial instrument can vary according to the standard time frame for that type of transaction rather than a set number of hours, days or years. There are many sources of finance, which would all provide the business with a quick source of money, which will have to be paid back. But the amount the company needs can limit them to a range of sources of finance and methods of repayment e.g. interest.

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Medium Term Finance Medium term sources of finance are required for investment in business for a medium period which normally ranges from one to five years. The medium term funds are required generally for the repair and modernization of machinery, renovation of the building, adoption of new methods of production, carrying advertisement. Medium Term Finance. Up to 5 years. Medium Term finance are sources of finance available for the mid-term of between 3 – 5 years typically used to finance an expansion of a business or to purchase large fixed assets.