Non deposit sources of
Funds:
1. Bank loan
2. Bank overdraft
3. Share issues
4. Leasing etc.
Bank loan :
Advantages:
Set repayments are spread over a time which is good for
budgeting.
Disadvantages:
- It can be expensive due to interest repayment.
- Bank may be require security for this types of loans.
Bank
overdraft:
Advantages:
- It helps to control & manage the period of money going out
and cash inflow into a business.
- For short term purposes ,it is usually cheaper & effective
than bank loans.
Disadvantages:
- Interest repayable on the amount which is overdrawn, so it
could be ineffective for the business to repay the due as the
overdrawn money could have different in amount .
- Overdraft can be expensive if it is used for a long-term period
of time.
Share
issues:
Advantages:
- Doesn't require to repay.
- It has to pay no interest.
Disadvantages:
- Profits are spread out to shareholders as dividend
- Ownership of the company could hand change in this case.
Leasing:
Advantages:
- Business can have use of up to date equipment immediately.
- Payments are spread over a good period of time which is good
for budgeting.
Disadvantages:
- The proper reason which doesn't satisfy from the business's
point of view is that this total asset belongs to finance
company.
- Leasing is very much expensive than any other non deposit
sources.