2.1.2 External finance Flashcards
Define external finance?
money sourced from outside the firm to fund it
What are the 9 main sources of external finance?
family and friends business angels government other businesses P2P share buyers banks crowdfunding
What are business angels?
high net worth individuals who invest in firms early on
What are share-buyers?
shareholders who invest and part own company
What is crowdfunding?
raising finance by asking large numbers of people for small amounts of money
Define P2P funding?
groups of people who put together savings that offer better rates and returns
What are soft loans?
funds made available at good times to borrow at low interest
adv of a soft loan?
borrower keeps ownership and control of business
disadv of soft loan?
complex process
What firm is a soft loan best suited to?
small start up firm
What is collateral?
other assets that borrower offers to lender to secure loan
Whats the difference between bank loan and repayment loan?
bank - agreed schedule of repayments
repayment - linked to new equipment or expansion
Capital gain?
profit made from selling a share for more than it was bought
Debenture?
long-term loan for a business
Secured loans?
a loan where the lender requires security such as property to provide protection in case borrower cannot pay
