2.1.2. External Methods Of Finance

Question 1

Loans

Answer 1

-Provoded by v BC and, family+friends
-repaid over time with interest
-Collateral is expcted to provide security for loan.
-Affected by current interest rate-external factor in economic influences

Question 2

Share capital

Answer 2

-When a private company is formed, ownership is split into shares.
-These shares can be sold to investors who become shareholders.
-When share is first sold, capital enters the business.

Question 3

Venture capital

Answer 3

-Method of providing finance in higher risk investments (high interest rate) generally through a combination of loans and share capital.
-When selling shares or taking loan isn’t viable VC is used.
-Used to find significant period of growth for established small business.

Question 4

Overdrafts

Answer 4

-To allow a customer to continue spending money even when account becomes negative.

Question 5

Leasing

Answer 5

-Leasing an asset is an alternative to buying the asset outright. It is rented for a monthly fee for set period of time.
-In the long term leasing tends to be more expensive than purchasing an asset straight away

Question 6

Trade credit

Answer 6

-Goods or services provided by a supplier aren’t paid for immediately.

Question 7

Grants

Answer 7

Money from government which is very rare. Usually to create jobs in areas of economic deprivation