2.6 Raising Finance Flashcards
What is internal finance?
A source of finance that comes from within a business.
What is external finance?
A source of finance coming from outside of the business.
What are advantages of internal finance?
You don’t go into debt, No interest rates, Less risk, Cant lose personal liability.
What are disadvantages of internal finance?
Less volume of money, less security, opportunity costs and its your own money.
What are advantages on external finance?
Lots of funds, more reliable, might not have to pay back, not your money.
What are disadvantages of external finance?
More risk, Can lose your personal belongings, interest rates, might have to pay back.
What’s a difference between a source and method of finance?
A source of finance is like internal or external while a method is things like crowd funding or retained profit.
What are types of internal finance?
Retained profit
Selling assets
Owners capital
What are types of external finance?
Bank loans
Share capital
Venture capital
Bank overdraft
Leasing
Trade credit
Grants
What is a method of finance?
The process at which a source of finance provides money to businesses.
What are some examples of methods of finance?
Loans, Share capital, Venture capital, Overdraft, Leasing, Trade credit, Grants.
What sources of finance might a sole trader and a partnership use?
(Unlimited liability)
Owner capital, Bank finance, Trade credit, Leasing.
What sources of finance might a business with limited liability use?
Trade credit, Share capital, Bank finance, Venture capital, Crowdfunding, Leasing.
What is a business plan?
A document which states the business idea and how it will be financed. This includes a cash flow forecast which shows the business inflow and outflow starting a closing balance.
