25. External finance Flashcards
Sources of external finance:
- Family and friends
- Banks
- Peer-to-peer lending
- Business angels
- Crowd funding
- Other businesses
Mehtods of finance:
- Loans:
· Bank loans
· Mortgages
· Debentures - Share capital:
· Ordinary sales (equities)
· Preference shares
· Deferred shares - Venture capital
- Bank overdraft
- Leasing
- trade credit
- Grants
authorised share capital
is the maximum amount that can be legally raised
bank overdraft
an agreement between businesses and a bank that means a business can spend more money than it has in its account (going ‘overdrawn’). The overdraft limit is agreed and interest is only charged when the business goes overdrawn
Capital gain
The profit made from selling a share for more than it was bought
Crowd funding
Where a large number of individuals (the crowd) invest in a business or project on the internet, avoiding the use of a bank
debenture
a long-term loan to a business
Equities
Another name for an ordinary share
External finance
Money raised from outside the business
Issued share capital
Amount of current share capital arising from the sale of shares
Lease
A contract to acquire the use of resources such as property or equipment
Peer-to-peer lending (P2PL)
Where individuals lend to other individuals without prior knowledge of them, on the internet
Permanent capital
Share capital that is never repaid by the company
Secured loans
A loan where the lender requires security, such as property, to provide protection in case the borrower defaults
Share capital
Money introduces into the business through the sale of shares
