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start-up capital
capital needed by an entrepreneur to set up a business
working capital
the capital needed to pay for raw materials, day-to-day running costs and credit offered to customers, in accounting terms: working capital = current assets - current liabilities
management buy-out
the existing managers of a business purchase it from the owners to take full control
internal finance
raised from the business’s own assets or from profits left in the business (ploughed-back or retained profits)
external finance
raised from sources outside the business
retained profit
the profit left after all deductions, inluding dividends, have been made; this is invested back into the company as a source of finance
liquidity
the ability of a firm to pay its short-term debts
overdraft
an arrangement with a bank that their customer can withdraw up to an agreed limit from their account as and when required; this is a form of borrowing
hire purchase
an asset is sold to a company which agrees to make fixed repayments over an agreed time period; the asset belongs to the company once the final payment is made
leasing
obtaining the use of equipment or vehicles and paying a rental or leasing charge over a fixed period, this avoids the need for the business to raise long-term capital to buy the asset; ownership remains with the leasing company
equity finance
permanent finance raised by companies through the sale of shares
long-term loans
loans that do not have to be repaid for at least one year
debentures (or corporate bonds)
bonds issued by companies to raise debt finance, often with a fixed rate of interest
rights issue
existing shareholders are given the rights to buy additional shares at a discounted price
business angel
an individual, usually with business experience, who directly invests part of their wealth in new and growing businesses
crowdfunding
the use of small sums of capital from a large number of individuals to finance a new business venture
microfinance
the provision of very small loans by specialist finance businesses, usually not traditional commercial banks
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