Internal And External Essay

774 Words4 Pages
Sources of Finance Raul B. Reyes (#4093649) FINC 400 Professor Thompson January 15, 2012 All businesses need money. Every company small or big always requires money as a capital to start a business and to keep a business. There are 2 different sources of funds companies can utilize 1) Internal sources of funding and 2) External sources of funding. Internal sources are funds use by the buss. When I say inside it can come from numerous sources internally from a business’s own funds to profits and depreciations. In terms of starting up a business the main internal sources of funding begins within the business itself and or personal sources. The profits are the cash generated from the business. The advantage of utilizing internal sources of funds is that it is by far cheaper (less expensive) and the time it takes to secure it is shorter. The funds that are borrowed come from within whether it is personal savings or simply borrowing from family members or friends. These ways require minimal paperwork and the need to run credit reports is not necessary and or required. If you decide to take this option (internal sources of funds) since the money is borrowed within you will be able to maintain control of your business. Although this option may be feasible a few things one may want to consider before making the final decision to borrow funds this way is the impact it will have on you and your future if the business fails and personal financial security. The disadvantage to internal source funding is that if and when the business needs more funding (money) from an outside source there is little to no relationship with any outside lenders. Internal sources of finance is very limited. On the top of that there is no record of a credit history being established and the availability of cash is irregular. This is most likely due to how a company’s cash flow situation

More about Internal And External Essay

Open Document