Studied by 1 person
Business 2.1.1 internal finances 2.1.2 externa finance
internal finance
money that comes within the business
external finance
money that comes from outside the business
sources of finance
where the money comes from
methods of finance
how the money comes
internal sources of finance
owners capital
pro:- do not have to repay
con:- risk losing everything
sales of assets
pro:- no interest
con:- no longer have a potential use for asset, might be needed in the future
retained profit
pro:- no interest
con:- share holders mights ask for it back
external sources of finance
overdraft
trade credit
loan
grants
share capital
venture capitalists
overdraft
the facility to overspend on a current account up to an agreed sum.
pro:- improves cash flow
con:- interest payments are high
trade credit
an arrangement by a supplier to provide goods and services on account
pro:- more time to pay back money owed
con:-hard for a start up business to build trust
grants
fixed amounts of capital provided to business by the government or other funding organisations
pro:- does not need to be repaid
con:- strict criteria
loans
when a lender provides capital to a borrower and the borrower agrees to repay the borrowed money, with interest over a long period of time.
pro:- can be negotiated to meet business requirements
cons:- business has to pay interest
share capital
money raised from the sale of shares which is used to fund the future activities of a business
pro :- no interest or repayments
cons:- possible loss of ownership
leasing
a contract that allows the renting of assets from another party.
pros:- lease company is responsible for all repairs and damages
cons :- more costly in the long run
