Identification of the sources of finance available to a medium size Assignment

Identification of the sources of finance available to a medium size task, - Assignment ExampleThe legal implication comes in handy in that if the business does not go into overdraft, then the bank cannot charge interest. Overdrafts are repayable on demand, this could have a negative effect to the business in lawsuit of bankruptcy or where the business has no liquid cash to repay, posing a financial risk as well. A commitment fee is ordinarily charged by the bank where a business wishes to increase its overdraft facility. No tax is charged. We can compare the opportunity cost of opting for overdrafts as compared to short consideration loans, with short term loans, the business does not have to worry about the bank withdrawing an overdraft before it is in a position to repay because there is an element of security which is not available with normal overdrafts. throw credit is an interest free short term loan. If a business has a good alliance with its suppliers, this could be a v iable choice of finance. Raw materials may be purchased on credit with payment terms varying from between 30 to 90 days. In a period where the general price of goods and services is escalating, purchasing through credit keeps costs down. How a business operates its credit facility has a significant influence on credit scoring affecting its future accessibility to credit. Also, a companys credit rating could be change state if the business delays in payments therefore making it difficult to obtain additional trade credits bringing in a tangible financial risk. Trade credits are not subjected to tax.If a business wishes to borrow from a bank for only a short period of time to purchase items much(prenominal) as fixed assets, then that would be termed as taking a short term loan. The amount is given in full at the commencement exercise of the period and is paid in instalments. Term loans have legal implications that can be sited by the fact that the loans carry a facility letter con sideration out the terms of the