- 5 new delivery vehicles need to be purchased for the company.
The company could take use the external short term source of finance leasing. This would allow them to use the delivery vehicles in return for regular payment. Usually, the maintenance and repair costs are not the responsibility of the user and large sums of money will not be needed. However, if the company need the delivery vehicles on a regular basis and are not just required occasionally, then the company should consider taking a bank loan even though this would mean that the company needs to repay after a certain amount of time, in regular installments. An agreement would be set up between the borrower and the bank so the company would need to stick to this agreement in order to avoid problems.
- A sports team needs new uniforms.
If a company wanted to buy new uniforms for a sports team then they should consider the trade credit source of finance because it is an interest free way of raising finance however, the company need to be careful when paying back the bill because the cost can increase and it can also result in poor business relations with suppliers.
- A new machine is required for a printing company.
If a new machine is required then the company should consider loan capital from industrial loan specialists depending on the size of the business. This would allow the company to buy the new machine in order to print and then pay back the loan after a certain amount of time. If a business is thinking of purchasing a new machine, then it should also consider a bank loan. If the company depends on the use of the machine then it would be useful to consider taking a bank loan which would then be repaid to the borrower in regular installments.
- A builder needs to buy materials for building a villa.
Trade credit would be a good source of finance for the builder because when buying raw materials to build a new house it is common for a business to pay for them at a later date. It is an interest free way of raising finance and it is particularly profitable during periods of inflation.
- A new company is looking for start up capital.
The company should consider taking loan capital from debentures. These are creditors of the company but not the owner. There is an expiry date by which the company have to pay back the borrowed amount. Bank loan could be another possible source of finance for the company due to the fact that most bank loans are short or medium term but due to the nature of the loan the bank might be more flexible with the deadlines and the amount of interest rate being paid.
- A firm is looking to recover bad debts.
Debt factoring would be the most appropriate source of finance for this firm because it involves specialized company providing finance against unpaid invoices. The firm would hire another firm in order to look into their bad debts and try to recover as much money possible and consider the remaining as bad debt.
- A salesman is paying for flights and accommodation for an overseas sales trip.
The salesman should use a credit card due to the fact that it is flexible, secure in many ways and interest free if the limit is not exceeded. The company can limit the salesman to a certain amount of money that he/she is allowed to use while traveling abroad.