External Sources of Finance for Sole Traders, Partnerships, and Companies

OTHER MANAGEMENT

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
CONCLUSION................................................................................................................................3
REFERENCES................................................................................................................................4

INTRODUCTION
The external source of finance is referred to the money invested by the outside source in the
company. This report will discuss the external sources of finances available to the company and
will examine the difference and similarities that have in the context of the sole trader, partnership
and the companies.
MAIN BODY
External source of finances are defines as the money coming in the business from the
outside environment. This help the businesses to boost the development process in the
organization. Long term source of finances are referred to the finances that has been invested for
the period of over five years. The external source of the finances are as follows-
Long term bank loans-
Bank loans are provided to both the unincorporated and the incorporated companies in
the market. These are provided at regular interest payments to the companies. Generally bank
loans are provided as an unsecured loan which means company does not need to mortgage
companies property to the bank. Loans must be repaid on time otherwise banks are open to take
legal action against the companies. The loans are provided to every business structure be it sole
trader, partnership or the company. Only major difference while providing loans to different
business structure is that the business charge interest amount according to the capital requirement
of the business. The more the business loan amount is, the less the interest is to be paid by the
business (Haralayya, 2021).
Companies are in major profit while taking bank loans as they are the ones who generally
borrow big amount of borrowing from the company. Further, bank loans does not create any
ownership right means bank is nowhere responsible for the operations of the business and banks
does not interfere in the affairs of the business.
Share Capital-
Share capital is the another source of finance that can be raised by the company as a long
term external source of finance (Borisovna, 2020). Sole trade, partnership and private limited
companies are not allowed to raise share capital but for public limited companies share capital
can be raised from the public by issuing share on the stock exchange. These simply means that