A source of funds refers to the origin and nature of financial resources utilized for asset acquisition, expenditures or investment purposes.
Key Sources:
- Retained earnings and profits divert cash flows internally
- Debt raises capital through various loan instruments and creditors
- Equity attracts investments in exchange for ownership stakes
Example:
A property developer leveraged a mix of shareholder equity, bank loans, and crowdfunded investments to purchase land for a new housing project.
Takeaways:
Diverse, documented sources enhance transparency and compliance. Appropriate sourcing lowers costs of capital. However, restrictive regulations may apply to foreign funds given risks like money laundering. Sustainability hinges on source reliability aligned with a venture’s lifecycle needs.