Analysis of Long Term Finance Sources: Similarities & Differences

This essay provides a detailed overview of long-term financing sources available to different types of businesses, including sole traders, partnerships, private limited companies, and public limited corporations. It explores options such as retained earnings, long-term mortgages, share issuance, governmental grants, and trade credit. The analysis highlights the similarities and differences in accessing and utilizing these financial resources based on the scale and structure of the business. The document emphasizes the crucial role of long-term finance in sustaining and expanding business operations, referencing key academic works to support its findings. Desklib provides this document as a valuable resource for students studying finance.

Sources of long term
finance

Contents
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
Sources of finance........................................................................................................................1
Similarities in terms of long term finance...................................................................................3
Differences in terms of long term finance...................................................................................3
CONCLUSION................................................................................................................................4
REFERENCES................................................................................................................................5

INTRODUCTION
The financial foundation of any business. Any business, regardless of its scale, structure, or
field of endeavour, cannot endure for very longer sans fiscal assets (Alexander and Dakos,
2020). The requirement for financing in various company kinds would be emphasized in this
study along with those companies' various options of obtaining funding.
MAIN BODY
Sources of finance
In a company that operates, the management can govern operating activities by using a
variety of financial resources. Yet, there are a variety of techniques to obtain funds in any
corporate organisation. There are two types of financing: short-term and long-term. Long-term
financing is brought into account in this study document.
Long-term financing: It is the practise of obtaining funds for a length of duration longer
than a year in order to carry out different operating duties within a company. A company could
obtain financing in a variety of techniques, but even so those techniques are divided into various
categories according to the scale and type of the company enterprise. According to their
characteristics and size, many corporate entity kinds obtain funding in the following methods.
Sole traders: A sole trader is a self-employed person who runs a company. The number
of professional members is limited to just 1 or 2. These commercial organizations typically
struggle with a lack of funding, thus financing must be obtained in order to control their
numerous operating activities. Hotels, tradesmen, and beauty salons are a few examples of these
company categories.
Sources of long term finance in these firms:
 Retained earnings: They are the earnings which remain in a company following paying
for various costs and, if applicable, taxation. The company's proprietor reinvests back
these kinds of gains to utilize these as a cushion whenever necessary. As a result, it falls
within long-term financing for a sole proprietor (Aysan and et.al., 2021).
 Long-term mortgages: A sole proprietorship's operator may choose to obtain financing
from a variety of commercial entities, including banks, which offer money in the format
of long-term lines of credit with adequate or affordable lending levels.

 Selling of Resources: This form of long-term financing is employed whenever things are
at their lowest point for the company and the proprietor immediately requires cash. Using
this technique, a solo proprietor could raise money by liquidating company property.
Partnerships: These are groups of people made up of 2 or more people who collaborate to
complete a single widely accepted company goal while having shared their holdings and
obligations.
Sources of long term finance in these firms:
 Banking mortgage: The management of the business place a significant amount of
confidence in this kind of long-term financing. Using banks' long-term strategies as a
foundation, a corporation could borrow a respectable quantity of money.
 Mortgage: With this type of funding, a partnerships company is able to generate money
while leasing any of its holdings. Banks and other commercial vendors both offer this
service.
 Share issuance: This is a less typical method of raising money in partnerships companies.
In this method of funding, the partnerships business obtains capital depending on a long-
term repayment strategy by offering equity.
Private limited businesses: They are individually held commercial entities that collaborate
on projects. Their minimal workforce size is 3 people, and they have a maximum worker count
of more than 100.
Sources of long term finance in these firms:
 Trade credit: These options assist the company in accessing financial assets as necessary
in accordance with long-term paying policy. This could entail lending money for the
business from a single person or a business, like a banking or postal offices.
 Overdraft: Also known as bank mortgages, they are several terms under whereby a
business might obtain funding from banking institutions.
 Share issuance: It is among the most typical methods used by businesses to raise funds in
the format of a minor split of share capital.
Public limited corporations: These are privately held business entities which collaborate on
societal projects. The primary goal of these kinds of governmental organizations is to achieve
societal goals, and they devote their operative activity to advancing community (Babich and
Birge, 2020).

Sources of long term finance in these firms:
 Governmental grants: A governmental grants, in the context of a governmental firm, is a
monetary award that is typically provided to different publicly institutions. In contrast to
any other finance institution or a commercial seller, these subsidies or cash are provided
at relatively minimal interest levels.
 Hire purchase: In this form of funding sources, a large institution purchases the
money that could then be repaid in interest-bearing instalments.
 Shares which are publicly traded: They are the kinds of stocks which aim to raise capital
for the business in the type of securities (Blackwell and Kohl, 2018).
Similarities in terms of long term finance
Basis Sole traders Partnership Private limited
companies
Public limited
companies
Time period Greater than a
year
Greater than a
year
Greater than a
year
Greater than a
year
Collateral
security
Needed Needed Needed Needed
Goal Expansion Expansion Any expansion
or new item
launch
Increasing
service-oriented
behaviour
Differences in terms of long term finance
Basis Sole traders Partnership Private limited
companies
Public limited
companies
Collateral
security
Collateral
needed/possibility
of acquiring a
financial item
Needed Occasionally not
necessary
Not always
necessary
Conditions Norms depending
on sole
proprietors.
Standards driven
requirements for
a partnership.
Standards from a
commercial
enterprise govern
the conditions.
Standard
requirements for
public
companies.

Relations Individual
relationships with
lending
institutions.
Partnerships are
formed.
Agency
personnel.
Public company
transactions.
CONCLUSION
From the aforementioned data, it may be inferred that financing is crucial in controlling how
the company operates. It serves as a conduit for carrying out all corporate operations.
Nevertheless, there are different methods of purchasing depending on the type and scale of a
corporate organisation.

REFERENCES
Books and journals
Alexander, C. and Dakos, M., 2020. A critical investigation of cryptocurrency data and
analysis. Quantitative Finance. 20(2). pp.173-188.
Aysan, A.F and et.al., 2021. In search of safe haven assets during COVID-19 pandemic: An
empirical analysis of different investor types. Research in International Business and
Finance. 58.
Babich, V. and Birge, J.R., 2020. Foundations and trends at the interface of finance, operations,
and risk management. Operations, and Risk Management (December 28, 2020).
Blackwell, T. and Kohl, S., 2018. The origins of national housing finance systems: a
comparative investigation into historical variations in mortgage finance
regimes. Review of International Political Economy. 25(1). pp.49-74.