When assessing finance options for your business, many options available to larger companies cannot be applied to smaller business such as issue of shares. However, there is still a multitude of options out there with the most common being a Bank loan. This source of finance covers all time ranges from short-medium in the form of overdraft whilst also providing long term with a traditional bank loan. An overdraft provides extra funds towards your business account at a set limit helping maintain payments to debtors supporting the working capital cycle. A long-term bank loan is also subject to tight lending restrictions which can make it difficult to obtain the required funds for your company. Repayments are based on interest accrued and the original balance repaid to nil.
Retained earnings refer to profit that is left over after paying all associated costs, taxes, and dividends if applicable. This of course can be used as a source of finance however, businesses in their infancy will struggle to generate anywhere near enough to fund large investments project so this method may not be the most applicable to SME’s.