2.1.2 External finance Flashcards
1
Q
What are sources of external finance?
5
A
- Banks
- Peer-to-peer funding
- Business angels
- Crowdfunding
- Other businesses
2
Q
What are the pros of a bank loan?
3
A
- > Interest rates
- Flexibility (no set of rules on how to spend)
- No equity given up
3
Q
What are the cons of a bank loan?
3
A
- Complicated/time consuming (^paperwork)
- Collateral (business or personal asset)
- Must be consistently profitable (pay interest back)
4
Q
What are the pros of friends and family funding?
3
A
- Little/no interest
- ^Flexible (unexpected events)
- Easier to secure loan
5
Q
What are the cons of friends and family funding?
3
A
- Strain relationships
- Changing power dynamic
- Limited legal protection
6
Q
What is peer-to-peer funding?
1
A
- Websites that match investors willing to lend to start-ups
7
Q
What are the pros of peer-to-peer funding?
2
A
- Application = fast and convenient
- Unsecured (^flexible)
8
Q
What are the cons of peer-to-peer funding?
2
A
- Unsecured
- ^Rate of interest
9
Q
What are business angels?
1
A
- Individuals who invest in very early stages of business (dragons den)
10
Q
What are the pros of business angels?
3
A
- Provide to ^risk firms
- No interest (no collateral)
- Investors sector knowledge/contacts
11
Q
What are the cons of business angels?
3
A
- Take sig amount of equity
- Long to find suitable angel
- Not suitable for investment below 5,000 or ^than 150k
12
Q
What is crowdfunding?
1
A
- Obtaining finance from many small investments, usually web based appeal
