2.1.2 External finance

Question 1

What is external finance?

Answer 1

The funds generated and used outside the business to finance its operations

Question 2

What are the 7 methods of external finance?

Answer 2

Loans
Share capital
Venture capital
Overdrafts
Leasing
Trade credit
Grant

Question 3

What are the 6 external sources?

Answer 3

Family and friends
Bank loans
Peer-to-peer lending
Business angels
Crowdfunding
Other businesses

Question 4

What is peer to peer lending?

Answer 4

A platform that allows businesses to borrow and lend sums of money

Question 5

What are business angels?

Answer 5

high net-worth individuals, who directly invest in new, growing businesses

Question 6

What’s share capital

Answer 6

Money business raises by selling shares to investors

Question 7

What’s venture capital

Answer 7

money invested by an individual or group that is willing to take the risk of funding a new business in exchange for an agreed share of the profits

Question 8

What are the 2 pros of external finance?

Answer 8

-Access to larger sums of finance
-Brings knowledge and experience

Question 9

What are the 3 cons of external finance?

Answer 9

-Loss of control
-Business plan often needed
-Intrest, risk of debt