Analysis of Long-Term External Finance for Various Business Types

This report provides an overview of long-term external finance sources for different business structures, including sole traders, partnerships, private limited companies, and public limited companies. The report evaluates various financial instruments such as hire purchase, bank mortgages, venture capital, invoice financing, debentures, common stock, and preference shares. It explores the suitability of each financial source based on the business type and its specific needs. The report also touches upon grants and crowdfunding as financing options for partnerships. The conclusion highlights the importance of financial records in understanding a company's financial status and performance, emphasizing their role in making informed business decisions. The report is well-structured and provides a comprehensive analysis of financial options available to businesses.

Accounting for Business

Introduction
Accounting is essential to operating a company because it allows you to monitor revenue
and expenses, ensure regulatory compliance, as well as provide comprehensive financial details
to shareholders management, as well as the regulator that could be used to make corporation
decisions (Connolly and Jackman, 2017). The study mainly evaluates key sources of external
long-term finance for sole trader business, partnership firm, private companies and listed public
companies.
Main Body
Task
Evaluation of different long term external financial sources:
Sole Traders:
Hire Purchase
Sole trader could buy an asset via hire purchases by spending a portion of purchase price
like down payment as well as leasing the remainder before full payment is received. On sales of
equipment or related assets, hire buy arrangements are often applicable.
Banks' Mortgages and Lines Of credit
Sole trader may apply for loan from banks or other financial institution. A commercial
loan credit line, personal loans, cash advances, as well as a mortgage are all examples of this.
Sole proprietorship choose trade credits and credit facilities because they do not need a mortgage
on the business properties. Sole trader's trade receivables are usually used to obtain trade credit.
Sale and Lease Back
Whereas if sole proprietorship has no other their assets to sell, then he can want to sell asset or
properties and then lease this back from buyer. This allows him to keep his current business
name as well as carry on with regular operations while collecting money for expanding.
Assets are being sold (Khan, 2015).
When sole trader's personal resources as well as retained earnings are depleted and additional
investment in company is needed, may decide to selling some his properties. This may be a land
that is mentioned under the company's name. A independent contractor could rent a workplace
and use proceeds from sale to broaden his enterprise.
Private Limited companies:
Venture Capital: Often private companies need venture capitalists' assistance when they are only
getting started. Venture capitalists examine the enterprise in depth to assess its growth prospects.

Then, if they are happy, they will invest in corporation. When the business performs well and
investment partners see that company's stock has skyrocketed, they go for the escape path.
Finance for invoices
Invoice lending helps businesses to borrow funds towards the amount of outstanding consumer
bills. Invoices factoring as well as discounting are two most common types of invoice financing.
In most cases, one will get up to 85percent of value right now, and the rest (excluding the
financing charge) until the buyer pays invoice. If one have a lot of corporate as well as Small
medium clients who have longer payment times or paying as longer as possible, invoice
financing could be a wonderful choice. It's a smart way to fill up the gaps in the cash flows. In
most cases, invoice is purchased as debts; it's standard practice that if invoice isn't charged, one'll
be covered from debt owing (Fraser, Bhaumik and Wright, 2015).
Credit cards for businesses
Another similar type of the business financing source is commercial credit-cards scheme, which
are most commonly used medium of shorter and longer-term debt finance. Entities can
make payments for business-related transactions with credit card and defer paying the
interests before the outstanding balance is covered off before credit-free period expires.
Business overdrafts
Bank overdraft is excellent financing alternative. A structured overdraft requires enterprises to
make transactions that exceed their prevailing account's available balance. In other terms, if the
balance goes below zero, the company owes funds to the bank.
Public limited companies:
Debentures:
These are longer-term loans primarily issued by public limited companies to large general public,
Interest's rates over such debentures generally vary between 0.01 to hundred pounds. Debentures
are mainly issued with specific condition and terms that conditions and are typically guaranteed
to a company's properties. Debentures are good choice for longer-term borrowing since interest
on them is paid before taxes. Another benefit of debentures is that they've been repaid even
though the business is not profitable. As opposed to choose capital and bonds, the issue
costs of debenture is minimal.
Common Stock
Common stock is longer-term finance that is given to the corporation's buyers. Common stocks
of company are most liquid, which means they could be purchased and sold quickly. Since the

risk involved with common shares is restricted to initial cash purchase, it is quite low. They are
considered high returners when contrasted to other investing options.
Preference shares
Preference shares implies share those that pay a fixed amount of dividends payment to
stockholders’ in lieu of ordinary stock. In preferred shares, the corporation is not obligated to pay
dividends during periods of low earnings. In the case of bankruptcy, preferred shares collect
dividends ahead of the common shareholders.
Mortgage
This is a longer-term loan that borrower gives to the landlord in return for the security of real
estate house. Based on someone's risk tolerance, financial stability, and other conditions, one can
opt between fixed rate as well as adjustable-rate mortgage. Since it combines the purchase of
residential property with the availability of financial assistance, mortgage lending makes
borrowing versatile and inexpensive. The mortgage offer interest rate is also tax-free. Mortgage
payments are made on a set timeline, which helps company to manage cash flow and needs and
conditions accordingly.
Partnership:
Grants:
A company enterprise may be eligible to obtain a grant for a new project under exceptional
circumstances. Small Business Development Study, for instance, is a state initiative that provides
research grants towards sole proprietors, associations, and other small enterprises. Each funding
period, SBIR selects a theme, like new recycling technologies advancement and awards grants to
businesses operating in those fields.
Crowdfunding
Attempting to turn towards internet for the crowdfunding platforms is a newer way of
financing partnership. Crowdfunding operates by raising a number of small donations rather than
either one two big ones for your company. Crowdfunding will take several forms, from giving
customers a potential product to offering a potential return on investments. If one decide to
use crowdfunding tool, make sure understand the procedure and goals (Balaban, Župljanin and
Ivanović, 2016).
Conclusion
Form above study this has been articulated that financial records represent the financial
status of company or firm and the performance of activities. In other terms, they assist in gaining
a better understanding of the company's financial situation. Efficient and current accounts would

not only help keep track of spending, operating margin, and potential debt, but they will also
enable you to equate existing data to past financial accounts and assign budget accordingly.
References
Books and Journals: