Sources of finance

Sources of finance are mainly dependent on various circumstances of the organization. Besides, Finance that needed to operate any kind of organizational activity is collected from various sources. However, These sources are mainly divided into two categories. Such as –

  1. Internal sources
  2. External sources

Finance that is provided by any person or organization at its own property is known as internal sources. Under internal sources, there are some other sources. Such as –

  • Own savings: Owner’s own saving is reliable sources of finance for any business organization. No person can expend all of his earning. Every month they save something from their earning. Owners own capital is made from this savings
  • Undistributed profit: The company’s undistributed profit is another external source of financing. The full profit of any organization is not distributed among its owner. Some portion of the company’s profit is saving for meeting unexpected or emergency expenses.
  • Depreciation fund : The important internal source is the depreciation fund. Every organization needs to buy some big machinery. For that company needs a huge investment. The total purchased price of the property in a year is divided into its lifelong in purchasing a new property in a year.

Under external sources:  There are two types of external sources. Such as –

  1. Share market: The share market is also divided into two categories. Such as –
  • General share
  • Bond
  1. Bank loan
  • Business bank
  • Investment bank
  • Insurance company
  • Specialize bank
  • Lease company

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