Sources for Financing the Working Capital

>> December 19, 2008





There are two type of sources for financing the working capital requirement .


a) Permanent / long term sources

(i) Shares Capital

In shares we includes
a) equity shares

b) Pref. Share capital

(ii) Debenture

(iii) Public deposits

(iv) Ploughing back of profit.

Here I am giving little explanation of ploughing back of profit . It means save some profit from business and when need of working capital it uses this is called ploughing back of profit this is good long term source of working capital.

(V) Loan from financial institution


b) Temporary / Short term sources

(i) Indigenous bankers are the short term source for financing the working capital .
(ii) Trade credits
Trade credit means getting of goods on credit . This is also a short term source of working capital.
(iii) Instalment credit
( iv) Income received in advance

(v) Advances received from customers
(vi) Bank loan include cash credit and overdraft
( vii) commercial papers
(viii) Purchasing and discounting of bills
( ix) Letter of credit





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