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Types Of Business Finance - Coggle Diagram
Types Of Business Finance
Retained Earnings
Merits
Continuous and convenient
No charges on assets
No explicit cost
No dilution of control
May lead to increase in market price of shares
Enhances capacity to absorb unexpected losses
Limitations
Dissatisfaction among shareholders due to excessive ploughing back
Uncertain
Opportunity cost - Sub optimal use
Trade credit
Merits
Continuous and convenient
Readily available
Increase sales
Helps in building inventories
No charges on asset
Limitations
Overtrading - Increase of risk
Limited funds
Higher cost of aquisition
Factoring
Merits
Cheaper
Helps in paying liabilities
Provides protection against bad debts
No charges on asset
Client can concentrate on more important areas
Limitations
Expensive when numerous invoices with less amount
Advance finance - Higher INterest
Uncomfortable for customers
Lease Financing