2.1 sources of finance

Question 1

Internal finance

Answer 1

Finance generated within the business

① Sale of assers-sell valuable items in rehirn for capital
+ free unnecessary investment but loose benefit of aung quenche
+ easily availatie but may not receive intended value

2 retained profit money business made & choose to reinvest
+ no loss of comtrol - finite slow growth
+ free no interes -opp cost
+ free source & no risk but conflict over duidends

③ Owners capital entrepreneurs own money
+ Easty available - loose savings pressure.
+ free of int but Limited

Overall Benefis= Free of interest,Easy acces,No 3rd parties
But not sufficient,Sig opp cost

Question 2

External finance

Answer 2

Bank loans = sum of capital borrowed of repaid w interest rates
+ large capital -collateral secured
Eq equal inst: easy plannings but costs + Lim debit
free adv but Business plan

Overdrafts red upro agreed limit
+ buffer daily expenses and bespoke to needs
-ext int rates high -24h Cancellation demand

③mortage loan repaid 20+ years
+ expensive purchase but missed reposed property

Debentures-bus and lender repay by certain date
+ fixed int rates but- fails to repay= deters inv

Fam + frds
flexible and not repayable but damaged relations and loose control

P2p - lending online w unsecured loan
+ quick & no strings -free to access int rates

Grants= meet see
No repayments and control but - use for purpose and time consuming app

Question 3

Ext finance 2

Answer 3

8 Crowdfunding via int n return of incentive
Cheap set up and built in marketing but not for large cap and copied idea
-copied ideas

@Business Angels -specialised + Risks small business Staring phase
+ advice in guidance, skills, networking and risks
- hard to find ✓, large eq. Too dependant

Venture Capital invest less risky & growing
+ non repayable -huge stake given up
+ Knowledge and expertise -influence decisions

Share Capital issue shares to raise finances comp

+ no int -divid
+ large amt -only comp can dilute ownership

② Trade credits buy now pay by 60 days.

+ boost daily finance due he time -delays,dommage relations
+ int free -large fine or late

13 Leasing - rent2-4 years

+ no maintenance, avoids large overflows
Exp ltm, rent vf probs

Question 4

Liability

Answer 4

Unincorporated= owner is business so no leg diff and unlimited liability so personally accounts for debts and unlawful acts
Use internal finance,bank, leasing, TV
Incop= limited liability so protection, confidence but loose control and competitors and ext finance

Question 5

Business plan

Answer 5

Business intentions
Guide to asses risks and rewards to red failure
+ und finance, raise, closer inspection gaps, risks and rewards
- overopt, who, danger of being stuck on plan

Question 6

Cf forecast

Answer 6

Estimates of inflows and outflows over a period of time
Recepits, expenditure ncf, opening= prev closing, closing= ncf+opening
Anticipate issues, caused inacc mgt
Speed in= inject capital, low tc
Speed out= delay pyt, jit

Question 7

Cf Uses and limitations

Answer 7

+ support app, buget, cf crisis
- overestimate, v change, certainty imp, don’t consider other factors