Short examples of external sources of finance pros and cons

what is an overdraft?

when the bank allows a business to spend more money than they have in their bank account. the loan has to be paid back within a year.

pros of an over draft (3)

always available, no repayment schedule

cons of an over draft (2)

high interest rate, more debt accumulation

what is debt factoring

when a company sells its unpaid bills (money customers owe) to another company in exchange for quick cash.

pros of debt factoring (2)

quick cash flow, always available

cons of debt factoring (2)

business doesnt get the full amount of money they lended because the debt factoring company takes a percentage, ruin relationships with customers if the debt factoring company is too aggressive