11 - Sources Of Business Finance (External) Flashcards
What are 2 advantages of owner’s capital?
No interest
Generates a high level of commitment to protect investment
What are 2 disadvantages of owner’s capital?
Limited amount
Can cause friction if owners invest differing amounts
What are 2 advantages of a loan?
Easy planning and budgeting
No control or ownership lost
What are 2 disadvantages of a loan?
Interest
Often secured against an asset
What are 2 advantages of crowd-funding?
Raising finance from lots of investors
No interest
What are 2 disadvantages of crowd-funding?
Partial loss of ownership
No guarantee of enough investment
What are 2 advantages of a mortgage?
No loss of ownership
Large amounts can be raised and paid back over a long time period
What are 2 disadvantages of a mortgage?
Interest
Not suitable for small amounts
What are 2 advantages of venture capital?
Finance provided by a professional
Potential in high risk investments they may make
What are 2 disadvantages of venture capital?
Partial loss of ownership
Possible conflict between the owner and venture capitalist
What are 2 advantages of debt factoring?
Speeds up cash flow
Another company takes on debt
What are 2 disadvantages of debt factoring?
Business will only receive a % of the amount owed
Can upset loyal customers
What are 2 advantages of a hire purchase?
Avoids paying a lump sum for an asset
Easy planning and budgeting
What are 2 disadvantages of a hire purchase?
Asset isn’t owned until payment is complete
Suitable for low cost assets
What are 2 advantages of a lease?
Asset responsibility remains with the supplier
Spreads the asset cost over its lifespan
What are 2 disadvantages of a lease?
Higher amount paid for the asset overall
Ongoing payments
What are 2 advantages of trade credit?
Delays purchases and improves cash flow
No ownership loss
What are 2 disadvantages of trade credit?
Potential discount loss
Only suitable in the short-term
What are 2 advantages of a grant?
No repayment needed
No interest
What are 2 disadvantages of a grant?
Lengthy application process
Conditions of an application could impact the business
What are 2 advantages of a donation?
No ownership loss
No repayment needed
What are 2 disadvantages of a donation?
Likely small amounts
Unpredictable financial source
What are 2 advantages of peer-to-peer lending?
Low interest rates
Easy budgeting
What are 2 disadvantages of peer-to-peer lending?
Limited amounts
Funds may only be available for the short-term
What are 2 advantages of invoice discounting?
No repayment or interest needed
Reduces costs and increases profits
What are 2 disadvantages of invoice discounting?
Often only available with cash purchases
May need to buy in larger qualities for the discount
