Sources of Finance
- Created by: penguin_2000
- Created on: 25-04-18 17:33
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- External
- Family and Friends
- Limited
- Pressure on relationships
- Banks
- Interest
- Spread over period of time
- Fixed rates
- Paid regardless of financial performance
- Charged penalty for early repayment
- Financial advice
- quick and easy
- Interest
- Peer to Peer Funding
- Online
- Borrowers given credit rating
- Business Angels
- High risk as business isn't established
- Suport and expertise
- Entrepreneur has to show good understanding of business
- Other Businesses
- May invest in other businesses with a view to higher potential returns than they're receiving with cash sat in the bank
- Not repaid
- No interest
- Dual control of partership
- Profits split
- Crowd Funding
- Involves raising finance from a large number of people often investing small amounts of money
- Investor only tied into paying into their promised contribution if total amount is raised
- Share Capital
- Form of equity capital
- Only pay dividends if profit is being made
- Amount of dividend not fixed
- Can raise large amounts of capital
- No interest
- Loss of ownership
- Complex and costly
- Threat of hostile takeover
- Venture Capital
- Look for high rate of return in specific time period
- Potential for large sums of money for investment
- Expertise
- Easier to attract other sources of finance
- Long and complex
- Conflict risk
- Expert financial projections required
- Partial loss of ownership
- Initially expensive
- Sources of Finance
- Internal
- Sale of stock
- Quick
- Reduces cost associated with holding them
- Sold for reduced price
- Leasing
- Use of up to date equipment
- Payments spread
- Expensive
- Doesn't belong to firm
- Sale of Assests
- Quick
- Can't use asset
- More expensive in long run if have to rent it back
- Retained profit
- Small amount
- Less dividends for shareholders
- Don't pay back
- No interest
- Sale of stock
- Internal
- Bank Overdraft
- Firm will have money during period between money going out and money coming in
- Interest
- Expensive over a long period of time
- Trade Credit
- No interest
- Discount given for cash payment is lost
- Need to have the money when debt is due to be paid
- Government Grants
- Not repaid
- Certain conditions have to be met
- Family and Friends
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