What are the External and Internal Sources of Financing of a Company in the Long and Short Term?


The sources of financing of a company are the paths that a company uses to obtain financial resources that are needed and carry out a certain activity. The company must guarantee its survival in the world of business organizations, so it must carry out and manage all types of sustainable financing sources. Funding sources are all the resources you will use to ensure your survival.

In order for the company to enjoy assets and assets, it must maintain a strong structure and the bases of that structure are all the financial resources that you will use throughout your life. These resources will be included in the liabilities of the company.

One of the most striking purposes of funding sources is guarantee, obtain and determine the monetary funds necessary to achieve increasingly large and profitable investments for the company. This is one of the most used ways to obtain financial resources.

External funding source

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This source refers to commercial loans, credits and discounts by third parties. It is also considered as a source of financing used in extreme cases, or when you need to make an investment immediately but you do not have the money.

financing external companies

In other words these are the sources provided by a third party, is made by a person who becomes a shareholder of the company.

Short term

The payment plan is less than the year, that is to say that the loaned goods must be paid within that period. In this, Factoring between companies stands out.

  • Factoring: Where a company assigns the collection of its debts to another.
  • Capitalize public payments: It refers to the unique payments made by public payments, a clear example of this would be unemployment.
  • Contributions by the partners.
  • Commercial discount: Where a financial entity collects debts by subtracting all interest.

Long-term

The payment plan is more than the year, that is, the loaned goods can be paid in quite a long time. In this one, bank loans stand out.

  • Loans: Where a contract drawn up by a lawyer is signed, it consists of a money loan, which must be paid within a specified period of time.
  • Leasing: It consists of the payment of a loan from one company to another, but this time made in installments.
  • Promise: It is a document that deducts the promise of payment of a person. East integrates payment and time within a specified period of time.
  • Crowdfounding: It is a payment through collective donations by a company.
  • Crowdlending: It is a loan made by investors to a company.
  • Credit line.

Internal funding sources

The internal sources of financing are the own sources of a company. The company will have its own goods and expenses, and you will not have to pay third parties, since it will not depend on third-party investments. The downside of this type is that the amount to invest will be much smaller, but you will not have to pay for anything after this. Before doing it, a financial analysis should be done to see if you are in capacity or not.

internal financial money

They are also known as social capital, since they are those donations that are within the flexible budget of the owners and partners.

Short term

  • Contributions of the owners and partners: It refers to the money given by the individuals that form part of the company, with the sole purpose of increase the budget of the company.
  • Amortizations and depreciations: It is where companies recover the costs of investments, this reduces profits and does not allow the entry and exit of money

Long-term

  • Sale of assets: Refers to the sale of land, buildings, houses or machinery, to be able to pay banking or financial needs.
  • Accrued liabilities: These are the taxes that must be paid by the company.
  • Reinvested earnings: It is where the partners do not distribute their dividends, but are invested in a partnership.

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