Comparative Analysis of Long-Term Funding Sources for Businesses

This report provides a comprehensive overview of long-term finance sources for various business structures, including sole proprietorships, partnerships, private companies, and public companies. It explores different funding options such as bank loans, hire purchase, crowd funding, venture capital, bonds, and equity shares. The analysis highlights the similarities and differences in accessing long-term funds, considering factors like risk, legal obligations, and the nature of the business. The report discusses the advantages and disadvantages of each funding source, providing insights into how businesses can secure capital for expansion and operational needs. It also emphasizes the importance of complying with legal norms when raising funds, especially for private and public companies. The conclusion summarizes the key findings, emphasizing the diverse ways businesses can obtain external funding based on their specific needs and structure.

INDIVIDUAL ASSISMENT

TABLE OF CONTENTS
INTRODUCTION.......................................................................................................................................3
MAIN BODY..............................................................................................................................................3
CONCLUSION...........................................................................................................................................5
REFERENCES............................................................................................................................................7

INTRODUCTION
Long term finance is refers to obtaining funds for more than shorter span. In current era,
it is essential for organization to fulfill its requirement by expanding the scale of business. The
current report will give emphasis on the long term sources of fund for sole proprietor,
partnership, private as well public companies. Present case study will evaluate similarities &
differences in the report.
MAIN BODY
Sole proprietor
There are various forms of continuing the business operations whenever it is managed
and controlled by single person it is referred as sole proprietorship. Hire purchase is crucial way
of arranging funds for greater span of time as this provides various opportunities to firm. The
benefits that are derived from utilizing the hire purchase is related with ownership. Sole trader an
enjoy this facility at earlier stage which leads business to move towards another action which can
uplift its revenue. Another option for raising money is secured loans from bank by paying
particular rate of interest on principal amount (Katabi and Dimoso, 2018). It is widely similar as
other approaches available in market as return on it need to pay for specified period. This is one
of the safest way of obtaining fund due to its formalized nature of lending financial resources.
Sole proprietorship get benefited from this by avoiding unnecessary contacting with irrational
parties which can harm business. For compensating risk bank charges higher rate of interest but
dealing with ethical firm for attaining financial requirements for longer duration is best method.
Crowd funding is alternative method available to sole businessman for acquiring higher
range of capital in order to accomplish business objectives (Sources of funding, 2021). To attain
business requirements in effectual pattern it becomes essential for this trader to have knowledge
of available platforms. It is similar as bank loan as well expects the borrower to pay in return for
using sum of money. The differentiation can be identified by analyzing the nature of operating
banking and crowd sourcing platforms. In addition to this, crowd funding comprises every type
of investors that can even provide threat to sole trader business but in respect to bank this risk is
absent.

Partnership
When two or more partners come together to achieve common goals by sharing profits
and loss it is termed as partnership organization. This firm takes various platforms into
consideration for obtaining the long term sources of finance. Bank loan or overdraft play
significant role in financing the partnership business for longer span. The biggest benefit that
partners obtain through this is feasibility of arranging liquidity in quick manner. if it is paid
earlier than mentioned date no charge is required to pay. With respect to this, it positively impact
business procedure by having balanced cash flow in operational activity which aid to retain
reputation in market so expansion objective can be achieved.
Hire purchase & mortgage are other options available for sustaining growth in desirable
direction by accomplishing requirements. These are not good as compared to overdraft facility
due to varying nature. Inviting additional partners provides opportunity to partnership firm to
have larger amount of financial resources by accepting the terms and condition regarding profit
sharing (Abbasi, Wang and Abbasi, 2017.). With respect to this, it is widely taken into
consideration by larger organization for diversifying risk among more number of partners. This
is better alternative as compared to other as it also invites the skills, knowledge, and experience
with financial resources.
Private company
There are different types of funding platform available to companies which provides
convenience in obtaining required monetary resources (Abor, 2017). The pattern that can be
taken into consideration by private companies comprises friends & family, bank loans, angel
investors, venture capitalist, crowd sourcing, etc. Majority of options are quite different from
each other and have different characteristics in turn benefits the organizations. Leasing and
government grants are part of external sources that resource firm to arrange monetary funds.
There are numerous other platforms also available that provide assistance to organization. The
equity crowd funding gives option to explore the market by getting interest of investors.
Bonds and debentures are another sources that aids firm to get funds for continuing the
business operations. From the analysis of all platform for achieving the financial goal it can be
easily identified that company need to comply with legal norms while raising through
debentures. There are special act that has been formed in case of private sector firms for

safeguarding the interest of investors. By evaluating the available options for private sector
company this can be identified that venture capitalist, crowd funding are better than debenture as
no extra legal obligations need to comply. Local authorities, credit unions, assets finance and
leasing are some other alternatives.
Public Company
Once the firm has listed with legal authorities for carrying out its operational
activity it is considered as public firm. It is one of those type of company which has maximum
option for raising fund such as Equity shares, bonds, term loans, preferred stock, venture capital,
leasing & hire purchase, etc. There are various big platform that becomes ready to share their
capital with public organization due to its trustworthy goodwill, etc. Several types of investors
show interest in investing which is kindly similar to normal crowd funding (Bykanova and et.al.,
2017). Venture capital is largely used platform by large multinational partnership firm as this
enhances its ability to generate profitability by sharing expertise knowledge. They are usually
looking for high growth business opportunity which ultimately enlarges scope of firm.
Long term sources of funds are used for numerous purposes one of the reason is
expansion for capturing new product line or market. Public show interest in investing by pooling
their small amount of savings which forms the large capital in turn helps organization to get
larger equity capital. This is better than crowd funding as dividend is shared only after the
estimating the profit which is biggest benefit.
CONCLUSION
From the above report it can be concluded that there are several ways of raising funds
from external sources. The current report has included sole proprietor, partnership, public and
private company can use crowd sourcing, bank loan according to its pros & cons available to
firm, etc.

REFERENCES
Books and Journals
Abbasi, W. A., Wang, Z. and Abbasi, D. A., 2017. Potential sources of financing for small and
medium enterprises (SMEs) and role of government in supporting
SMEs. Journal of Small Business and Entrepreneurship Development.
5(2). pp.39-47.
Abor, J. Y., 2017. New Venture Development and Sources of Financing. In Entrepreneurial
Finance for MSMEs (pp. 21-50). Palgrave Macmillan, Cham.
Bykanova, O.A. and et.al., 2017. Assessment of the economic potential of sovereign wealth
funds. Journal of Applied Economic Sciences. 12(1). p.70.
Katabi, R. J. and Dimoso, R., 2018. Relationship Between SMEs Sources of Funds and
Investment Evaluation Techniques. Business and Management
Studies. 4(4). pp.61-70.
Online
Sources of funding. 2021.[Online]. Available through: <
https://corporatefinanceinstitute.com/resources/knowledge/finance/
sources-of-funding/#:~:text=The%20main%20sources%20of
%20funding,public%20(issuing%20debt%20securities).>