3.2 Sources of finance (WIP)
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8 Terms
sources of finance
ways a business gets its money
short-term finance/revenue expenditure
refers to sources of finance necessary for day-to-day business operations
medium-term finance
sources of finance 1-5 years in duration
long-term finance
sources of finance >5 years
4 main reasons of different interest rates
Risk of a business failing to pay ↑ interest rate ↑
Administration costs (cost of hassle) ↑ interest rate ↑
Time of period of a loan ↑ interest rate (compensate for opportunities lost) ↑
Expectations of success ↑ interest rate (dampen inflation effect) ↑
6 factors of the appropriateness of different sources of finance
Size of the business
Purpose of the funds
Amount required
Cost
External environment
Duration
internal sources
comes from within the org w/o third party help