2.1.1 Internal + External sources of finance

external

• Loans 

• Peer to peer funding 

• Angel investors 

• Share capital 

• Venture capital 

• Trade credit 

• Grants 

• Overdraft 

• Crowdfunding 

internal

• Personal sources 

• Retained profit 

• Sale of assets 

• Sale and leaseback 

• Debt factoring

short-term finance (under 1 year)

finances day to day trading of the business

• Share capital 

• Retained profits 

• Venture capital 

• Mortgages 

• Long-term bank loans 

medium-term finance (2-4 years) examples

finances major projects or assets with long life

• Leasing 

• Hire purchase 

• Government grants 

long-term finance (5+ years) examples

finances the whole business over many years

• Bank overdraft 

• Trade creditors 

• Short-term bank loans 

• Factoring 

factors effecting choice of finance

• the amount of personal finance available to the entrepreneur

• the legal structure of the business

• how risky the new business is judged to be

how does the riskiness of the new business effect the source of finance

if the business is very risky banks may not offer loans which means finance will need to be from an alternative such as friends and family. 

how does the legal structure of t business effect the source of finance

private companies (sole traders, partnerships and LTDs) cannot raise finance from the public though public companies (PLCs) can

how does the amount of personal finance available to the entrepreneur effect the source of finance