Internal Sources of Finance

Definition: 

Funds provided by the current owners of the firm, or from the outcome of business activities.

• Owner’s Equity: Finance obtained by the business from the private wealth of the existing owners of the business. 

• Retained profits: Finance obtained from the proceeds of business operations; profits reinvested back into the firm and not withdrawn by owners; inexpensive source.

• Sale of assets: Unproductive or under-utilised assets can be sold, redirecting funds into areas of more vigorous growth opportunities.  

All related to the Balance Sheet.

The use of internal sources of funds for growth is a safe (low-gearing / low debt) way to finance growth.