Understanding Financial Management

Understanding Financial Management

Edward Bonello
22 May 2015


Describe the organisation’s sources of finance or funding.

Bank loans:

Are issued to individuals or other legal entities, such as a business, as a means to
gain immediate capital at the cost of further incurring interest on the sum borrowed. Such loans are
usually payable back over a number of years and most banks will require the entity requesting a loan
to comply with a number of terms and conditions. The bank might also impose additional penalties
or freezing of personal/business assists in the event that the borrower fails to repay the loan in the
stipulated time.

Local government, EU initiatives and competitions:
Most local governments and the EU
establishment are committed at creating a self-sustained economy which should in turn create more
jobs which translate in a better quality of life for the citizens. To this aim a number of funds are
periodically allocated at low interest rates and distributed through competent agencies such as the
Malta Enterprise. Other initiatives such as the Maltese GetQulified scheme also help companies in
training their employees at a reduced cost.

Trade creditors:
Creditors which supply any type of stock or service without requiring
immediate payment can also be considered as a source of funding. As a client of the creditor the
business will get what it needs while also enjoying retained cash in hand.

Similarly to creditors, employees will also be putting forward the fruits of their
labour on a daily basis but be paid only at the end of the month.

Venture capitalist/investors:
Business oriented people or organisations which are willing to lend
money at an interest, retain a percentage on income and possibly requesting an active role within
the new organisation.

Any entity which owns a share (part) or number of shares of a company.
Not responsible for the day to day...