Sources of Finance: Business: Pearson (Edexcel): GCSE (9:1)

Capital

Money that can be used by a business to set up, grow or expand

Sources of finance

Ways a business can get money or capital to invest in the business

Short term finance

Money that can be accessed for immediate needs or unforeseen events

Overdraft

A negative balance on a bank account, on which interest is usually charged

Trade credit

When a supplier gives you an extended time to pay, usually 20, 60 or 90 days, and often interest is charged

Credit limit

The maximum borrowing limit on an overdraft or credit card

Credit period

The time given to repay the amount borrowed

Interest rate

The percentage charged on the amount borrowed, applied over time, which must be repaid to the lender

Long term finance

Money that is planned to be spent by a business to enable it to achieve it's objectives

Venture capital

Money invested by people or organizations who take a risk so they can receive a return

Share capital

Money invested in exchange for a number of shares in the business, investment cannot be repaid, only sold but shareholders may receive dividends

Bank loan

Money lent to a business by a bank which charges an agreed interest rate

Retained profit

Surplus money left over at the end of the financial year that is reinvested in the business

Crowdfunding

An online way of many small investors providing money to start up or expand a business

Dividend

A payment to all shareholders for every share they hold, usually every year

Return on an investment

Making profit on the money that you put into a business