Sources of finance

Lesson 22

Finance

Money required in the business.

Start-up capital

Internal capital used in the business to buy fixed and current assets before it can start trading.

Working capital

Finance needed by the business to pay day-to-day running expenses.

Capital Expenditure

Money spent on fixed assets like vehicles, machinery, buildings, etc.

Revenue expenditure

It is the money spent on day-to-day expenses which does not involve the purchase of long-term assets

Retained profit

Profit kept in the business after all costs, tax, and owner's drawings or dividends have been paid.

sale of assets

Raising finance by selling assets that are no longer needed by the business.

Owners savings

Money invested into an unincorporated business by the owners from their personal savings.

Sale of inventory

The generation of funds by selling finished goods or unwanted stock held by the business.

Issues of shares

Raising finance by selling shares to investors only available to limited companies.

Bank loans

Money borrowed from the bank that should be repaid over time with interest.

Debentures

Long-term loans issued by limited companies that paid fixed interest and must be repaid.

Overdrafts

A bank facility allowing businesses to spend more than the balance in its account up to an agreed limit.

Leasing

Using an asset for regular payments without buying it outright.

Trade credit

When a supplier allows a business to delay payments for goods and services.

Debt factoring

Selling debts owned by a customer to a specialist company in return for immediate cash.

Grants and subsidies

Financial incentive given by the government or organizations to lower COP that does not have to be repaid.

Micro-finance

Small loans and financial services provided to individuals or small businesses with limited access to banks.

Crowdfunding

Raising finance through small contributions from a large number of people, often online (GoFundMe).