Means obtaining capital resources from outside the firm’s resources or accounts. This can only be done in one of three ways: debt, share capital or grant.
Debt can be obtained for day-to-day (short-term) transactions or for longer-term capital needs. Among the ways of borrowing for the short term are: bank overdraft, trade credit and credit factoring; for the longer term: bank loans, commercial mortgages and debentures.
Share capital can be obtained via a rights issue, the issue of preference shares, or by a flotation of the company’s shares on the Stock Exchange.
Grants could come from the European Union, the government’s regional policy or from a local enterprise board. It should be remembered, however, that grants provide only a tiny fraction of the capital needs of business.