5.2.4—Selecting finance sources

Selecting finance means matching the amount, duration, cost, risk, security and control effects of a source to the business need.

A firm should compare what it can repay, what assets or ownership it can offer, how quickly it needs funds and what uncertainty it faces.

A seasonal retailer may use an overdraft for short timing gaps but a term loan for equipment; choosing the reverse can create avoidable repayment pressure.

The “cheapest” source depends on total cost, flexibility, security and control—not just the headline rate.