Sources of Working Leasing It is by which business can obtain fixed assets for which pays a series of contractual and

periodic payments. There are two parties involved, that is lessee Capital lease contract and lesser owner of the assets. Hire purchase Hire purchase is the legal term for a contract, in which people usually agree to pay for goods in parts or a percentage at a time. This is advantageous to user of the asset because it spreads the cost of expensive items over an extended time period. Factoring Under this arrangement all credit sales of a customer are sold to the factor and the buyer is to make payment to the factor. Money lenders moneylender is a person or group who offers small personal loans at high rate of interest Internal surplus n important source of working capital financing is to plough back profits i.e., the use of profit generated from operations to meet additional working capital needs instead of borrowing the same from any of the other sources mentioned above. Trade credit !ormally goods are not bought against cash generally suppliers extend credit ranging from "# to $# days for making payment. Banks follow different methods for computing the maximum eligibility of working capital depending upon the total working capital. 1. Turnover ethod %or working capital re&uirement up to 's. (## lakh, the maximum amount of assistance is computed on the basis of a minimum of )# percent of the pro*ected annual turnover. The borrower will be re&uired to bring in ( percent of annual turnover as margin money !. "ligi#le $orking capital ethod %or limits above 's.(## lakhs and below 's.)### lakhs, the eligible working capital method, described below, is to be adopted. %. &ash #udget ethod %or limits above 's.)# cores, the Cash +udget ,ethod is to be followed. In this method, &uarterly cash forecast is prepared indicating the shortfall in the cash re&uired for the operations. The shortfall will be met by bank finance. +ank finance can be. %und/based. +. !on/fund based.

Factoring is a traditional source of short term funding. %actoring facility arrangements tend to be restrictive and entering into awhile can lead to aggressive chasing of outstanding invoices from clients, and a loss of control of a company0s credit function Installment credit is a form of finance to pay for goods or services over a period through the payment of principal and interest in regular payments.

Invoice Discounting is a form of asset based finance which enables a business to release cash tied up in an invoice and unlike factoring enables a client to retain control of the administration of its debtors. Income received in advance is seen as a liability because it is money that does not correlate to that specific accounting or business year but rather for one that is still to come. The income account will then be credited to the income received in advance account and the income received in advance will be debited to the income account such as rent. A liability account used to record an amount received from a customer before a service has been provided or before goods have been shipped. A letter of credit and guarantee The bank issuing a 12C assures payment to a supplier in the event of default by the buyer who is the customer of the bank3 sub*ect to all conditions in the 12C being literally complied with. A bank overdraft is when someone is able to spend more than what is actually in their bank account. The overdraft will be limited. bank overdraft is also a type of loan as the money is technically borrowed A commercial paper is an unsecured promissory note. Commercial paper is a money/market security issued by large corporations to get money to meet short term debt obligations e.g. payroll, and is only backed by an issuing bank or corporation0s promise to pay the face amount on the maturity date specified on the note. 4ince it is not backed by collateral, only firms with excellent credit ratings will be able to sell their commercial paper at a reasonable price.