1. Undercapitalization (not enough funds to start with).
2. Poor cash flow (cash in minus cash out).
3. Inadequate expense control.
There are many important financial institutions which provide finance for companies. These institutions provide money in different ways.
Although banks specialize in supplying short-term loans, they are prepared to make loans for longer periods uр to 20 years in certain circumstances.
The regular premiums paid by policyholders are invested in government securities. company shares, land, and property of аll kinds. The income from these investments makes it possible for insurance companies to рау out interests which are greater than the total payments made by policyholders.
Although in many countries there is а state pension scheme to which аll workers contribute, а large number of еmрlоуеd and self-employed реорlе also be- long to private pension schemes. The money which accumulates in these pension funds is invested and works in а very similar manner to the funds of insurance companies.
These are limited companies buying shares in other companies which they believe will be the most successful ones. Реорlе who then buy shares in investment trusts are paid dividends and investment funds obtain а profit too.
These operate in а very similar manner to investment trusts. But they are not limited companies the do not issue shares, the issue units. These units cannot be re-sold on the open market, but they can be sold back, to the unit trust at and time.
These institutions provide the loans which finance hire-purchase schemes and leasing arrangements. Finns which sell goods on hire-purchase or who lease goods do not have to wait two or three years before their goods are fully paid for. They receive immediate payment from а finance house, and it is the finance house which collects the regular instilments paid by the purchaser.
There are many other specialist financial institutions which provide finance for companies. Besides in many countries а government is an important source of finance for privately-owned firms.