Sources of Finance

What is a source of finance?

Different ways a business can access funds

Why do entrepreneurs need sources of finance?

Start or grow a business

What is an internal source of finance?

Taken within the business

What is an external source of finance?

Taken from out of the business

Is retained profit internal or external?

Internal

Is owners capital internal or external?

Internal

Is the sale of an asset internal or external?

Internal

What is owners capital?

Personal savings

What are the advantages of owners capital?

• Don’t have to repay

• No interest

• Owners maintain control

• Motivational

• Not time consuming

What are disadvantages of owners capital?

• Limited amounts

• Threat to family and personal finances

What is retained profit?

Profit kept from a business to help future finance activities

What are the advantages of retained profit?

• Don’t have to repay

• No interest

What are the disadvantages of retained profit?

• Only available if it exists

• Shareholder’s won’t like if it is at the expense of their dividends

What are the advantages of selling an asset?

• No interest

• Don’t have to repay

• Making use of a dead asset

• Immediate lump sum cash injection

What are the disadvantages of selling an asset?

• Only one off

• May be losing a good asset

Is crowdfunding internal or external?

External

What is crowdfunding?

Many people invest small amounts

What are the advantages of crowdfunding?

• Quick

• Easy

• No big promises

What are the disadvantages of crowdfunding?

• Target amount may not be reached

• Idea could be copied by competitors

Are business angels internal or external?

External

What are business angels?

Wealthy people investing in start-ups for share

What are the advantages of business angels?

May offer expertise

What are the disadvantages of business angels?

May be hard to get them to invest

Is raising finance from family and friends internal or external?

External

What are the advantages of raising finance through family and friends?

Repayment flexible

What are the disadvantages of raising finance through family and friends?

• Limited amount

• Pressure on relationships