unit 3

Needs for funding

Short term, Long term, Start up, Expansion

Personal savings of an owner

internal sources of finance

pros: Easy to retrieve, Quick

cons: may take time for owners to gain savings

Retained profits

Internal source profits kept back by the business

pros: no interest, quick

cons: start up wouldn't have savings

Selling existing assets

internal sources

pros: no interest to be paid, helps make money quick cons: a business may not have unwanted assets

Hire Purchase

allowed a business to buy a fixed asset by make a down payment first then it is paid in installments

Share Capital

capital raised by selling shares to shareholders

Venture capital (business angels)

money invested by a third party to fund a business

pros and cons of venture capital

pros: provide expert advise on the business, can gain money quick cons: the angels would take a lot of profits this could be risky for the business

Crowdfunding

raising capital from small amounts from many investors, usually through social media and the Internet

founders dont get dividend, instead get discounts or perks

Pros and cons of crowdfunding

pros: no interest, efficient cons: may not get enough funds in time

Bank overdraft

agreement with banks where a bank withdraws more money than in its account

pros: can be arranged quickly cons: expensive, due to interest

Trade payables

business often buy resources and pay for them at a later date

unsecured back loans

when a bank lends money without the securing of having claim on the business's assets

mortgage

the lender must use land or property as security in change for money

debenture

an unsecured debt, usually with a maturity of 10 years or more