sources of buisness finance

why does a buisness need finance

to cover start up cost such as renting places etc. Running cost such as wages, bills. And growing the business

what factors affect the choice of finance

amount needed

why the finance is required

situation of business (is buisness doing we lore struggling on his cost)

define internal sources of finance

money that coms from inside of the buisness

define external sources of finance

money that comes from outside of the business

properties of long term finance

large sum of money for buisness

have many years to pay

used for buisness starting up or expanding

properties of short term finance

maller sum of money for business

have 1 or under years to pay

used for covering costs.

long term finance examples

venture capital

crowd funding

loans

retained profit

share capital

personal savings

define venture capital

when investors buy parts of buisness, hoping to make profit.

define crowdfunding

when people online give donations to help start up a buisness project

Define retained profit

when profit that business made fro the past is now it.

define share capital

money made by selling shares

sources of short finance

bank overdraft

trade credit

define bank overdraft (benefits and drawbacks)

when bank allows buisnesses to withdrawal more money than they have on their current balance.

benefits

• quick to get

• interest is on the amount used

• can be used on unexpected shocks

drawbacks

• bank can ask for money anytime

• interest is high

• they can cancel the overdraft anytime

define trade credit (benefits and drawbacks)

when buisness buys something, but they can pay it back later.

benefits

• can pay later

• make money off goods before paying

• helps cash flow

drawbacks

• buisness can get bad name if don’t pay back on time

• suppliers might not trust buisness again

benefits and drawbacks of personal savings

benefits

• no interest

• easy to use

drawbacks

• owner might not have enough money

loan benefits and drawbacks (family/friends)

benefits

• easy and fast to get

• agree how and when to pay back

drawbacks

• might not be enough

• might lead to unhealthy relationship with friends/ family that you owe

bank loan (benefits and drawbacks)

benefits

• keep money for long time

• keep full control

• interest is same

• payload bit by bit

drawbacks

• bank can take physical stuff you owe if you don’t pay back

• you still have to pay all of loan + interest even thought if you haven’t used all of it.

share capital benefits and drawbacks

benefits

• raise a lot of money

• dividend payments can be missed

• no intereest

drawbakcs

• loss of control

• satisfy shareholders

ventured capital (benefits and drawbacks)

benefits

• large access to money

• provide lots of skill

drawbacks

• owner lose control of parts of buisness

• venture capitalist may not be interest if buisness doesnt grow.

crowd funding (advantages and disadvantages)

benefits

• cheap way

• investors can provide their skills and advice

• good publicity

drawbacks

• give something back to investors

• limit to amount investors can give