28th August 2014

Sources of Funds and the implications thereof

Sources of Funds and Implications thereof

Presented By – Nishant Nagda

28th August 2014

Sources of Funds and the implications thereof

Funds

Short-termLong-term

EquityDebenturesTerm Loans

Venture Capital

CreditorsWC LoanPublic Deposits

Factoring

Own

Loan

Loan

Hybrid

Loan

Loan

Loan

Own

28th August 2014

Sources of Funds and the implications thereof

Equity refers to owners’ capital/share in the business. In a company it means the share capital and the retained earnings

Debentures are the instruments that entitle the holder thereof for a fixed rate of interest

Term loans comprise of loans from Banks or financial institutions for a fixed tenure and a fixed rate of interest

Venture capital refers to seed capital or growth capital contributed by people other than the founders of the business. It mainly comes in the form of Angel Investors or Venture capitalists

28th August 2014

Sources of Funds and the implications thereof

Creditors become a source of short term funds since they are paid in arrears – normally 30-90 days

Working capital loan – Banks generally support business with Overdraft, Cash-credit and Bank-guarantee to tide over the working-capital problem

Public Deposits are issued by the companies with good credit rating. These deposits are normally come at a cost higher than the bank interest rates

Factoring refers to sale of debtors for a commission – this enables quick conversion of debtors into cash

28th August 2014

Sources of Funds and the implications thereof

Sources of Funds Cost Risk LiquidityEquity High Low MediumTerm Loans/ Debentures Low High LowVenture Capital Medium High MediumCreditors/ WC loan/ Public Deposits Low Medium HighFactoring Low Low High

“It’s a balancing act to maintain the right mix of sources of funds”

28th August 2014

Sources of Funds and the implications thereof

Thank You