Assess the implications of the different financial sources?


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Connor Sephton answered
The main financial sources are banks, credit unions, private investors, and other income streams, such as money from stock shares or rented properties, etc.

Each type of financial source has a set of implications - for example, when people borrow money from a bank, they will need to pay a certain amount of interest on the principle; as well, they will be penalized for late payments or other infractions of the written contract between lender and borrower.

These conditions are the implications of borrowing from a financial source that is a bank. With credit unions, the rules will be much the same as with regular banks - however, the rate of interest may be lower.

More Implications From Different Financial Sources

  • Private Investors
With private investors, there will be a legal agreement between the buyer and the seller; however, sometimes, these agreements are simply verbal contracts. The implication of not having a written legal contract between both parties can be serious when one side fails to live up to his or her obligations.

The best private investors will not give money to business people until they have performed due diligence on companies; due diligence is the process of checking financial statements, and measuring assets against liabilities.

  • Other income streams such as renting out property or receiving dividends from stock shares, can be lucrative and practical; however, these sorts of financial sources often have their ups and downs. For example, tenants may leave suddenly, or run out on the rent; stocks may take a dive, leaving the stockholder with little to show for their initial investment.
Every financial source will have its implications, pros and cons. The key to finding the right financial source is to examine the drawbacks and benefits, and find the best fit for a particular investment opportunity, business loans, or other financial need.

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