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

acknowledgement of the sources of finance available to a medium size business, - Assignment ExampleThe legal implication comes in handy in that if the business does not go into overdraft, then the bank cannot charge avocation. Overdrafts be due on demand, this could have a negative effect to the business in case of bankruptcy or where the business has no liquid cash to repay, posing a financial risk as well. A commitment fee is usually 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 condition loans, with short term loans, the business does not have to worry about the bank withdrawing an overdraft before it is in a smear to repay because there is an element of security which is not available with normal overdrafts.Trade creed is an interest free short term loan. If a business has a good relationship with its suppliers, this could be a viable choic e of finance. Raw materials may be purchased on credit with payment terms alter from between 30 to 90 days. In a menstruum where the general price of goods and services is escalating, acquire through credit keeps costs down. How a business operates its credit facility has a significant sour on credit scoring affecting its future accessibility to credit. Also, a companys credit rating could be worsened if the business delays in payments therefore making it difficult to obtain special 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 such as fixed assets, then that would be termed as taking a short term loan. The amount is given in full at the beginning of the period and is salaried in instalments. Term loans have legal implications that can be sited by the fact that the loans carry a facility letter setting out the terms of the