What Are The Types Of Business Finances In Pakistan?

All businesses small one's and big units require finance. They need money for investment in fixed asset such as land, building and machinery. One business is in operation, money is needed for the working capital. The financial requirements of a business on the basis of time duration are usually classified under three main heads one is short them term finance, second is medium term finances and the third one is long term finances. Short term finance is defined as money rose for a period of less than one year. Short term capital is required for meeting the day to day expenses of business such as payment of wages, gas, electricity bills, unforeseen expenses and other business expenses.

The short term finance can be raised by different method one of the least expensive method is trade credit for raising the business capital. In all the developing and developed countries of the world most of the sale and purchase of goods is carried on an open book account. Under this arrangement affirm buys material and equipments from the suppliers on a promise to pay the bill a later date which usually ranges from 7 to 90 days. Although trade credit is not thought of a loan, yet the fact is that the seller is financing the buyer for the period of time between the receipt of goods and the payment of bill. Trade credit is granted on the basis of financial standing and good will of the purchaser in the market.

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