Sources of Long-Term Finance: Debenture, Bonds, Equity Share Capital, and Venture Capital

Long Term Source Of
Finance

Table of Contents
INTRODUCTION ..........................................................................................................................3
MAIN BODY...................................................................................................................................3
1. Sources of long term finance..................................................................................................3
CONCLUSION ...............................................................................................................................5
REFERENCES................................................................................................................................7

INTRODUCTION
Long term sources of finance are not payable within a period of one year and generally
becomes a part of the capital of the organisation. They are specifically utilised when company is
planning for its growth and expansion. Some of the examples of long term sources of finance are
equity, term loans, and venture capital. Entrepreneurs come up with capital in the business
through debentures, term loan, bonds, venture capital and by equity and preference shares. For
sole partnership, company the owner is required both short or long term funds for their
establishments (Beckett-Camarata, 2020).
MAIN BODY
1. Sources of long term finance
 Debenture: It is an debt tool which assist the organisation in raising funds from public. It
assist the organisation to raise long term funds. Company pays interest in addition with
the principal amount. It is a promissory note which is not secured and is issued by a
private business enterprise without pledging any security or assets.
Advantages of debenture:
1. It is preferred by a number of investors as it is a low risk security.
2. Debenture holders do not contain any voting rights so it is easy for monitoring
management as it does not impacts the rights of equity or preference shareholders.
3. Its financing cost is lower as compared to preference and equity shares. Tax deductions
on payment of interest has also been provided to debenture holders by government.
4. It is beneficial for those investors who want clarity in transaction, risk free and healthy
returns. It is not issued for the purpose of profit.
Disadvantages of debenture:
1. The limit for raising funds has been sanctioned by company. The ability of business to
raise additional funds declines after a period of time (Ervural, Evren, and Delen, 2018).