Mention the Common Sources of Working Capital Finance

Working capital is a financial metric represents operating liquidity available to a business, organization or other entity, including governmental entity.

Common Sources of Working Capital Finance:

Loans from Commercial Banks: Small scale industries can raise loans from the commercial banks with or without security. This method of financing does not require any legal formality except that of creating a mortgage on the assets. 

Public Deposits: Often companies find it easy and convenient to raise, short-term funds by inviting shareholders, employees and the general public to deposit their savings with the company. 

Trade Credit: Just as the companies sell goods on credit, they also buy raw materials, components and other goods on credit from their suppliers. 

Factoring: Factoring is a financial service designed to help firms in managing their book debts and receivables in a better manner. 

Discounting Bills of Exchange: When goods are sold on credit, bills of exchange are generally drawn for acceptance by the buyers of goods. The bills are generally drawn for a period of 3 to 6 months. In practice, the writer of the bill, instead of holding the bill till the date of maturity, prefers to discount them with commercial banks on payment of a charge known as discount. 

Bank Overdraft and Cash Credit: Overdraft is a facility extended by the banks to their current account holders for a short-period generally a week. 

Advances from Customers: One way of raising funds for short-term requirement is to demand for advance from one’s own customers. 

Accrual Accounts: Generally, there is a certain amount of time gap between a income is earned and is actually received or expenditure becomes due and is actually paid. Salaries, wages and taxes.