2.1.2 External Finance Flashcards
Bureaucracy:
- system of government
- important decisions = state officials not elected representatives.
Social enterprise:
-specific social objectives = serve its primary purpose.
- seek to maximize profits while maximizing benefits to society & environment.
- profits are principally used to fund social programs.
Source of finance:
WHERE the finance is coming from
6 external sources of finances:
- Business angels
- Crowd funding
- Other businesses
- Family & friends
- Banks
- Peer to peer funding
Method of finance:
HOW the finance is provided
7 external methods of finance:
1.Overdrafts
2.Grants
3.Loans
4.Share capital
5.Venture capital
6.Donations
7.Leasing
Trade credit
Venture capitalist:
Risk seeking investor or a large scale business
Business angels:
Wealthy individuals - finance - equity (take risks)-business plan
+advice/contacts
-lose equity = less profits = less control
Any small-medium Ltd
Peer to peer funding:
other business owners individuals lend money = interest
+ quick access, relationships
-not large amounts, interest
Established businesses
Collateral/security:
- asset
- investor/bank takes ownership
- until the finance is payed back
Family / friends
Loans/gifts from those known
+ no repay (interest), flexible, similar objectives
-limited, pressure on relationship
Start up/small
Banks loans;
Borrowing fixed repayment (collateral)
+large amount, predictable repay
-risk assets, interest
Banks overdraft
Pre arranged spend more than have in current account
+flexible, use when need
-high interest
Crowd funding
Via internet video online small investors
+reward if donate, way of money
-may not raise enough
Start up with social benefit
Other businesses
Those with healthy cash balance invest
+easy to raise and less bureaucracy
-risk ownership
