1.3.4 - Sources Of Finance Flashcards
1
Q
Examples of short term finance:
A
- Overdraft
- Trade credit
2
Q
Long term finance examples:
A
- Loans
- Personal savings
- Crown funding
- Share capital
3
Q
What is crowd funding?
A
A relatively new way to raise start up funds which includes large numbers of people which give small funds. Some sort of reward given; share of profit or ownership.
4
Q
Pros of venture capital
A
- Opportunity for expansion of the company
- Valuable guidance and expertise
- Easy to locate
- No obligation for repayment
5
Q
Cons of venture capital:
A
- Forced management
- Limited decision making abilities
- Funding problems
6
Q
Share capital pros:
A
- Companies don’t have to repay their initial investments
- Freedom with the money
7
Q
Share capital cons:
A
- No privacy
- More money spent = less control over company
8
Q
Loans pros:
A
- Low interest rates
- Flexibility ( no rules on how you spent the money )
- Maintain control ( no equity lost when getting a loan )
9
Q
Loans cons:
A
- Tough to qualify
- High risk
- Fees and penalties can be high
- Can increase debt
10
Q
Pros of retained profit:
A
- Cheap
- Do not dilute the ownership of the company
11
Q
Cons of retained profit:
A
- Overcapitalization
- Unbalanced growth
12
Q
Crowd funding pros:
A
- Can be a fast way to raise finance with no upfront fees
- Sharing you idea, you can then get feedback and guidance on how to improve
13
Q
Crowd funding cons:
A
- Stressful: Crowd funding requires marketing, PR, and strategy
- Failed projects risk damage to the reputation of the business and people who have promised money
