Financing of working capital

The firm has many options available for financing there permanent, fixed or long term working capital as well as for the temporary or variable working capital. These are discussed below:

For financing permanent, fixed or long term working capital requirement:-

1) Shares: the firm can use shares to fulfill the financing requirement of permanent, fixed or long term working capital.

2) Debentures: debentures are the long term investment made by the shareholders so it is the most suitable form to finance the permanent working capital.

3) Public deposits: it is also the easiest way to get the permanent working capital.

4) Loan from financial institutions: the firm can fulfill the need of permanent working capital by taking loan from the financial institutions also.

For financing temporary, variable or short term working capital requirement:-

1) Commercial bank: the firm can take loan from the commercial banks for there short term working capital requirement.

2) Commercial paper: these are unsecured promissory notes for temporary working capital.

3) Trade creditors:  it means the credit extended by the supplier of the goods, which satisfy the short term needs of the firm.

4) Advances: the firm can take advances from its own customers also.

5) Deferred income: it means the income received in advance before supplying the goods by the firm which fulfill the short term needs of the firm.

6) Indigenous bankers: these type of banks found there origin inIndia. Before independence mahajans, rural money lenders and jewelers were the fore runners of these banks. These can also satisfy the short term needs of the firm.

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