DIFFERENT TYPES OF
FINANCE FOR A BUSINESS

An organization runs on Capital. The
better the sources of finance the easier it
is for an organization to sustain. With
setting up a new business acquiring
financial loans is the primary factor which
should be considered well in advance. In
as they don’t get much support
a typical large enterpriseThankfully every
compared to the former. arranging
finance doesdefned various policies to a
country has matter but not in extent to
smallbank loans for small and medium
offer start-up
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2

Following are some of the most common
sources from where one
start-up can avail financing:
Bank Loan: This is one of the most common
forms of loan that everyone tends to try as
the first option. However it becomes a bit
tough for a small start-up as banks usually
offer loans for organizations of repute.
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Asset Based Loan: In this type, the loan
amount to disburse is calculated based upon
the percentage of total assets. The assets are
considered based upon the accounts
receivable and also in combination with
available machines and equipment inventory.
Most of the cases, it is seen that 85% can be
achieved from accounts receivable and 60%
of the total inventory.
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Factoring: This method is indeed the most
suitable and easy method as the process to
offer the loan is based upon the invoices.
Generally factoring is taken by companies
that manufactures product and customers
pay the money at the later stage.
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Merchant Cash Advance: Here in this case
the idea is to provide cash advance is by
purchasing the future income. This means
as the provider offers a loan, one has to
repay the amount from daily credit card
sales until premium and advance amount is
recovered. This kind of financing is good for
hotels and restaurants or those having
www.tutorsonnet.com/fnancestrong credit card sales.

Purchase Order Finance: This form of finance
is based upon the purchase order and
ensures fulfilling production and shipment of
goods in time. Here the lender pays the
money based upon the purchase order.
Once the order is fulfilled one just need to
send a copy of invoice raised for the
customer to the lending agent. The agent in
turn collects payment for that invoice and
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Above mentioned are
some acceptable policies
that a start-up should
consider. They have to
ensure that during the
preparatory stage,
Operations management
Homework help will just
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