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BTEC Business Studies Level 3 - Unit 3 - Personal And Business Finance > 2 - External Sources Of Finance > Flashcards

2 - External Sources Of Finance Flashcards

1
Q

How are “external” sources of finance raised?

A

From a third-party

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2
Q

What can external sources of finance fund for a business?

A

Long-term investments

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3
Q

Why might external sources of finance be more costly?

A

Interest may be charged from loans

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4
Q

When isn’t interest charged from an external source?

A

If the business uses retained savings

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5
Q

What does a business sell when selling “share capital”? Who to?

A

Shares of the business

People or businesses

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6
Q

Why do businesses give away a percentage of their share capital?

A

For finance

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7
Q

What TV show involves share capital?

A

Dragon’s Den, BBC

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8
Q

Who do public limited companies create and sell their shares to?

A

Investors on the stock market

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9
Q

Who might private limited companies share their shares to?

A

Private equity companies

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10
Q

What are “bank loans and mortgages” important for?

A

Businesses

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11
Q

Who does a business borrow money from? What is paid along with the borrowed money?

A

A bank

Interest

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12
Q

Why might it be harder for newer businesses to get bank loans?

A

Banks see them as a riskier investment

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13
Q

What is meant by “trade credit”?

A

Where businesses pay their suppliers at a later date

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14
Q

What does trade credit involve?

A

Buying something and paying it at a later date

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15
Q

What type of businesses often use trade credit?

A

Supermarkets

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16
Q

How might supermarkets use trade credit?

A

They have food delivered, but pay the supplier later

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17
Q

What is meant by a “hire purchase”?

A

When a business buys something and pays for it in installments

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18
Q

What is an example of a famous hire purchase?

A

When PSG bought Kylian Mbappe from Monaco

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19
Q

What does a hire purchase allow a business to do? What product might be hired?

A

Use expensive products without paying for them directly

Machinery

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20
Q

Why might start-up businesses use “loans from family and friends”?

A

The owner might not have enough savings for the investment

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21
Q

Why might an owner give up equity to their donators?

A

So they don’t have to pay interest on a loan

22
Q

What is meant by a “government grant”?

A

Where a government give money to a business for research purposes

23
Q

What is an example of a set of government grants given out to countries in the EU?

A

Horizon 2020

24
Q

What is meant by “debt factoring”?

A

A business selling their debts to a third-party

25
Q

Who immediately gains cash from debt factoring?

A

The business selling the debt

26
Q

What will the debt from debt factoring be sold for in terms of its value?

A

It will be sold for less than its original value

27
Q

What will the third-party who collect the debt arrange and organise? What will they ensure?

A

The invoices

The debt money is collected

28
Q

What will the third-party from debt factoring retain to cover the cost of the debt collection service?

A

A fee

29
Q

What is meant by “venture capital”?

A

Where an investor provides a business with a loan or share capital

30
Q

What is meant to be ensured from venture capitalism?

A

Business growth

31
Q

What might venture capitalists ask for when investing?

A

Some control of the business

32
Q

How might venture capitalists gain some control of the business they are investing in?

A

Shares

33
Q

What might venture capitalists play a role in within the business?

A

As non-executive directors

34
Q

What is meant by an “overdraft”?

A

Where a business can borrow a limited amount of money from a bank

35
Q

Why are overdrafts flexible?

A

Businesses can borrow how much they like as long as they stay within the agreed limit

36
Q

How do businesses possibly pay for flexible overdrafts?

A

Higher interest rates

37
Q

What is meant by a “business angel”?

A

An affluent individual who provides funding in exchange for ownership

38
Q

What do businesses obtain through business angels?

A

Finance

39
Q

What is transferred through business angels and owners?

A

Ownership

40
Q

What does transferred ownership to business angels mean for owners?

A

Owners have less control over their business

41
Q

What do businesses not have to pay from business angel funding?

A

Interest rates

42
Q

What is meant by “crowdfunding”?

A

Raising finance by allowing large numbers of people to donate

43
Q

What are two websites businesses can obtain funding through crowdfunding?

A

Seedrs

Kickstarter

44
Q

What do business owners retain through crowdfunding?

A

Ownership

45
Q

What does crowdfunding mean for an owner’s existing ownership?

A

No shares of the business are sold

46
Q

What is an issue with crowdfunding?

A

It can take a long time

47
Q

What is crowdfunding unsuitable for?

A

Businesses who need quick funds

48
Q

What is GoFundMe?

A

A crowdfunding platform that allows businesses to share information on a product

49
Q

What does GoFundMe rely on?

A

People deciding to donate to a business

50
Q

Why do people make donations in crowdfunding?

A

In return for a free trial or pre-release access of a product

BTEC Business Studies Level 3 - Unit 3 - Personal And Business Finance (12 decks)

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