Sources of Finance for Sole Traders & Partnerships


Sole traders and partnerships refer to the simplest forms of business organization. A sole trader is a person who runs a business from his own name, supplying all the capital and assuming all the dangers. A partnership may include one or more person, Partnership members carry out business in common in pursuit of again. Both sole traders and partnerships carry unlimited liability (excluding the Limited Liability Partnership)–if the company goes bust, its owners can be made to compensate for any outstanding debts of their business from their own pockets.
Sole traders and partnerships have a vast range of options to get fund: personal savings, retained profits, working capital, the sale of assets, and bank loans. 

Personal Savings 
Put simply, personal savings would be the amount of cash someone has at his disposal. It becomes a source of the fund when the only trader or a partnership member is ready to invest it in his business. It’s up for the person to make a decision whether he’d like to maintain his savings or use them to purchase vehicles, equipment, tools or other things his business’s requirements. 

Retained Profits 
A company exists to make gains. Those gains can be either withdrawn from the owners of the company or reinvested to expand the company. If a sole trader or partnership members opt to maintain the gain for the business, this source of funding is called retained gain. 

Working Capital 
Working capital is the short-term fund or capital of a business. It’s calculated by subtracting current liabilities–just how much a company owes–from current assets–just how much money the business has or is owed. Using working capital to cover short-term fund requires amounts to another source of fund. 

Sale of Assets 
If a sole trader or a partnership needs money, it can dispose of a number of its assets, selling machinery, land, buildings, tools along with other assets not essential for the occurrence of a company. Nevertheless, assets typically are needed for a business to expand, and thus selling them can only be a temporary supply of fund. 

Bank Loans 
Taking a loan from a bank number to yet another source of funding available to sole traders and partnerships. Nevertheless, as these kinds of the business organization have unlimited liability, a person carrying a loan for his business is accountable for its repayment. In case the company goes bankrupt, he will still have to pay the loan back. 


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