Sources and Uses of Cash

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Cash is the money used to start up and run a business. When starting a business it is important to determine ways of obtaining cash in order to implement your business ideas. Once the source of cash has been determined, the next step is to plan how to use that cash for the growth and long-term survival of this business.

When starting a business or trying to expand it, one can apply loan or use savings. Savings is the best source, since it involves the use of money kept in a bank and can be accessed anytime. Savings is an asset that is very advantageous, and no payment is required, so it gives the owner full ownership rights.

Another source of cash is a short-term or long-term loan from a bank or any other microfinance institute. However, this is a liability. This is because the loan and interest has to be paid back. This source of cash is also cumbersome; it requires presenting other assets for the security of the loan.

Once the cash is acquired, it can be capitalized through buying of assets like machines and equipment necessary for running of the business. The cash can also be used for daily activities of a business, which are forms of liabilities like payment of delivery services, machinery maintenance and labor fee for smooth operation of a business.

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