Getting Finance For Jewelry Business < Business Articles By Mast Business Directory

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Getting Finance For Jewelry Business < Business Articles By Mast Business Directory

Finance is the crucial part of every business. It is regarded as the life line of any business and while talking about jewellery business finance occupies the lead role because for initializing any jewellery business you need to have a huge amount of investment. Jewellery business requires more start up money as compared to any other business simply because jewellery itself is a costly affair. But financing requirements will differ on the choice of the area of jewellery business you want to enter. So firstly you have to make a full-fledged business plan for determining financial requirements. All financial decisions will depend on that business plan.

These are the major decisions that you have to make for assessing financial requirements.

Decision regarding the area of jewellery business you want to enter:

Either you want to start a business in manufacturing sector or as retail store or in supply chain.

Decisions regarding level:

Either you want to start from low level selling or high level.

Scale:

Either it will be on small scale or large scale.

Market coverage:

Either you want to cover local market, national market or international market.

Regarding authenticity of the business:

Either it will be original jewellery business like gold, platinum, diamonds or artificial jewellery business like beads, stainless steel, and etcetera.

After having all these decisions finalized, you would arrive at the approximate amount of finance you require for your jewellery business. After that you should search for the sources from where you can arrange funds. There are many sources available for financing. The choice of source depends on the business plan. Broadly the sources of finance can be divided in to two broad categories.

Long term sources: Long term sources are those sources which are required for the period of 10-20 years or even more. These sources are required basically in the initialization stage or expansion stage. Long term sources of finance are:

Share capital:

If the company is registered one, it can raise funds from issue of shares. Shares can be equity shares or preference shares. Preference shares are those shares which carry preferential rights as regard to the payment of dividend and capital repayment while equity shares do not carry any preferential right. They are paid dividend after all the expenses and interest and preference dividend are paid. Thus equity shares are considered less risky source of getting finance. But the rate of dividend on equity shares is higher than any other source of finance.

Debentures:

While shares represent the capital of the company, debentures represent loan for the company. Debenture is basically a certificate acknowledging debt carrying right for principle amount and interest payment. The company issues debentures to the person giving loan to the company and that person is called debenture holder. Fixed rate of interest is paid to debenture holders every year and maturity period is also fixed. One more thing to be noticed while taking debenture as a source of finance that interest on debentures is a tax deductible expense and the company can avail tax advantage issuing debentures.

Loan from financial institutions:

Apart from shares and debentures company can also take loan from financial institutions. There are many financial institutions catering to the financial needs of the companies like IDBI, SFCs, IFC, SIDBI, IFCI, SIDC etc. they also carry a fixed rate of interest and fixed maturity period.

Retained earnings:

Retained earnings are the internal source of the company to meet financial requirements. Retained earnings are the profits accumulated for years. Company need not pay any interest or dividend on retained earnings and also there is no question of repayment. But they carry opportunity cost.

Short term sources:

Short term sources are required for the period of less than one year. These funds are needed to meet working capital requirements and to maintain liquidity. Short term sources of finance are:

Trade credit: It is the credit which the jewellery business owner can get from their suppliers. It does not provide any immediate cash, but it facilitates purchasing the stock without paying them immediately. It helps to maintain liquidity.

Customer advance: jewellery business owners can also take advance for the orders given by the customers. It is the part of the price money of the product that has been ordered by the customers. It also elevates the liquidity position of the company.

Cash credit: It is very popular source of short term credit provided by commercial banks. The customer having account in the bank is allowed to borrow up to a specific limit and can deposit it back whenever he has money. Interest on cash credit is charged on day to day basis on the amount actually withdrawn.

Bank overdraft: under this facility the company having account in bank is allowed to withdraw the money more than its deposited amount. Interest is charged only on that amount actually overdrawn.

Discounting of Bills- Nowadays discounting of bills of exchange and promissory notes are also provided by the Commercial Banks. The company can get the immediate payment of their bills receivables after deducting some discount from the face value of the bills receivables.

Related directory categories

Jewellery Directory
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Earrings
Gemstones
Necklaces
Pearl Jewellery
Rings
Wedding Bands
Watches
Diamond Jewellery
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