External or internal funds as sources of financing

Internal and External Sources of Funds

Introduction

A diversity of funding sources in an organization is a factor which be assured of ongoing programs. Depend from a single source of funds which implies that when there is a cut, has to adjust the number and quality of programs, or you tie men to devise strategies to ensure full steam more resources. Sources of Funds are also diverse and the amount requested for each investment amount differs. It is best to start with individuals, companies, associations or funds government that are close and where there is a prior relationship or the knowledge that there is interest in our organization. It is necessary to consider the economic the potential donor has to give their support.

Discussion

Companies need to grow and function of financial resources. These resources defined sources of financing, which may be internal and external. Funding is done for a variety of reasons. These are the reasons that capital assets requirements, new machinery or the constructions purpose, new projects etc. new product development are extremely expensive and required costly investment with capital gain. This financed done internally however; capital for machinery acquisition done externally. In this tight recession, and liquidity, companies search for capital in the form of loans, overdraft for the purpose of providing cushion to cash flow. Interest rate differs from organization to the organization and with the purpose of using that fund. There are three types of sources available for the organization. These are internal sources, equity finance and debt finance these two are part of external finance (James, 1988, Pp.46).

Internal source of funds termed are this resource of finances that come which comes mainly from organization funds, profits and depreciation. The main sources of the fund are organization owner's funds, selling personal or part of fixed assets, utilize the Profits or working capital. Whereas, external finance is a concern it is acquire from the financial institution, like, banks, investment bank and from public in the form of bonds, certificates which is call raising public debts. The main external finance sources include bank loans, mortgage loans, grants and loans hiring and leasing. Equity is one of the two external funding sources available to you. Equity funds are those generated by the invested capital of a firm. The best source of start-up funds is equity, and if you do not have the funds available ...