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IFCI provides loan for up to 25 years.

(d) All of the above

(c) Bills of Discount

(d) All of these

State Industrial Development Corporation was established in 1990.

• Equity shares. 
• Preference shares.

The short term loan provided by commercial banks to business firms is called bank credit. On the agreed terms, the bank credits the loan amount in the business firm/client’s account. 

Bank credit includes: 

• Loans and advances. 
• Cash Credit. 
• Bank Overdraft. 
• Discounting of Bills.

The money required for business activities is called business finance. 

The requirement of funds for business: 

1. To purchase fixed assets. 

2. To meet daily expenses. 

3. For expansion and growth of the business.

Till 57% the government permit equity participation by foreign investors in 34 industries.

The Industrial Investment bank of India was renamed as Industrial Reconstruction Bank of India in the year 1985.

Public deposits are used in short term and medium-term source of finance.

Difference between internal & external source: 

It is an arrangement in which the loan is credited to the customer’s account in the bank. He is allowed to withdraw as per the requirement. Interest is charged on the amount withdrawn.

• The shareholders have to bear a lot of risks. 
• Equity shareholders sink and swim with the company.

If the shareholder is not entitled to a fixed dividend in preference to others or if there is no prior right for the capital to be repaid, the share capital will be treated as equity share capital.

The amount deposited by the public with the company for a specific period at the predetermined rate of interest. These days, they are a source of finance. Many jointstock companies have been issuing advertisements and inviting public deposits to meet their short term and medium-term needs of finance.

At times, the businessman can take some advance from his customers against the order of goods given, it is called customer’s advance.

It is an unsecured promissory note issued by a firm having the good creditworthiness to raise funds for a short period varying from 1 month to 1 year. These are issued by a firm to other firms, to insurance companies, to pension funds and to banks.

It is a financial service under which a business firm sells its book debts to factors at a certain value who take the responsibility for debt collection on behalf of the business firm and provide the business firm protection from bad debts.

SIDBI was established in April 1990, as the principal financial institution for promoting, financing and development of small industries in India. It also provided venture capital assistance to entrepreneurs, leasing and factoring facilities to small scale units.

Those preference shares which are repayable at the end of the predetermined period are called redeemable shares, whereas non – redeemable preference shares are paid back only at the time of liquidation.

In the year 1956.

This bank was established for the rehabilitation and revival of sick and weak industries.

Convertible preference shares have the option of being converted into equity shares after a specific period of time. Non – convertible shares do not have this advantage.

(b) owner’s fund

The money required for business activities is called Business Finance.

In the year 1948.

The debentures which do not carry any interest payable are called zero per cent interest debentures.

• Issue of shares 
• Issue of Debentures.

The sources of business finance on the basis of ownership:

1. Owner’s funds. 

2. Borrowed funds.

1. On the basis of the period. 

2. On the basis of ownership. 

3. On the basis of the source of generation.

A business may generate finance from sources outside the business. They have usually borrowed funds which the enterprise needs to provide security against.

These are loans provided by those institutions that provide long – term finance to business organizations.

(a) Bank credit

1. Short term sources – 

It is required to meet the day to day needs of the business. The short term finance is also known as short term capital which is required for a period not exceeding one year. 

2. Medium-term finance – 

It is required for modernisation, sales promotion, innovation in business. It is taken for a period ranging between 1 to 3 years. 

3. Long term finance – 

Funds required for more than 5 years. These funds are required for making an investment in fixed assets and to meet the permanent needs of the business.

Three institutional finance companies are: 

1. Industrial Finance Corporation of India 

2. Industrial Development Bank of India 

3. Unit Trust of India

1. Objectives of Industrial Finance Corporation of India: 

• To provide medium and long term credit to eligible industrial concerns. 
• To provide loan and advances for the establishment, expansion, diversification and modernisation of industries. 
• To provide technical, legal and marketing assistance to industries. 
• It also provides a guarantee for loans raised by industrial concerns in the capital market.

 2. The objective of Industrial Development Bank of India: 

• It provides financial support to all industrial concerns without any restrictions. 
• It also provides refinancing facilities on the loans granted by banks and other financial institutions.
• To invest in shares and debentures.
• To provide technical support.

 3. Objectives of Unit Trust of India: 

• It mobilizes public savings under US – 64 and master shares plan. 
• Collecting the savings of Public and Promote growth. 
• Providing direct assistance to Industrial units. 
• Joining hands with other financial institutions and promoting growth.

The persons of Indian origin who live in foreign countries are known as Non – Resident Indians. They are an important source of long term finance in India. Their important contribution in the area of finance is foreign currency, NRI accounts and NRI money accounts. The share of NRI deposits in foreign capital is more than 30% and it is increasing continuously. However, NRI source of finance is costlier.