sources of finance 3.2

Internal sources of finance

come from within the organisation, from it’s own resources without the help of a third party

External sources of finance

are those that come from outside the organisation, usually with third party provider

What are the internal sources of finance?

Personal funds (for sole traders), retained profits and sale of assets

are personal savings long term or short term sources of finance?

short term

is the sale of assets long term or short term sources of finance?

short term

are overdrafts short or long term sources of finance

short term

trade credit short or long term?

short term

share capital short or long term?

long term

long capital short or long term?

long term

leasings short or long term?

long term

business angels short or long term?

long term

microfinance providers short or long term?

long term

crowdfunding short or long term?

long term

share capital

raised through shares on stock exchange.

share capital advantage

no interest rates

share capital disadvantages

lose control and have to pay dividends

lone capital

borrowed funds from financial lenders

lone capital advantage

fixed costs per month, can negotiate lower interest rates

overdrafts

banking service that allows you to spend more money that what you have in your account

overdrafts advantage

bank is lenient

trade credit

when the customer gets the goods before paying

trade credit advantages

does not incur any interest payments

trade credit disadvantages

gets more expensive if not payed back in time

Crowdfunding

raising money from a large number of people

Leasing

lessee drawing up a contract with a leasing company to use a non-current asset for an agreed fee

Leasing advantage

use something you cannot afford