Internal finance

Advantages of internal finance

• Capital is available immediately

• Cheap

• The business wont be subject to credit checks

• No need to involve third parties

Capital

The money provided by owners and producers

Capital expenditure

Spending on business resources that can be used repeatedly over a long period of time

Disadvantages of internal finance

• Can be limited

• Not tax- deductible

• Inflexible compared to other methods of finance

• Opportunity costs are high

Internal finance

Money generated by the business or its current owners

Retained profit

Profit after tax that is put back into business

Revenue expenditure

Spending on business resources that have already been consumed or will very shortly

Sale and leaseback

The practice of selling assets, such as property or machinery, and leasing it back from the buyer

External finance