5.1 Needs & Sources Flashcards
Finance
Money required to set up, run & expand a business
Start-up capital
Initial capital to buy fixed & current assets before trading
Working capital
Finance to run day-to-day operations
Retained profit
Internal
Ads: No repay, interest
Disads: New business doesn’t have & not enough profit
Sales of existing assets
Internal
Ads: Better use of unneeded capital & no debt
Disads: new business no asset & takes time to sell
Sales of inventories
Internal
Ads: Reduces inventory costs
Disads: Not enough inventory leads to unfulfilled customers
Owner’s savings
Internal
Ads: quick & no interest
Disads: Risk for owners
Issue of shares
External & long-term
Ads: No need to repay & No interest paid
Disads: Dividends paid & ownership change
Bank loans
External & long-term
Ads: Quick to arrange & low interest rate for big companies
Disads: Repayment & interest
Debenture issue
External & long-term
Ads: raise long term finance
Disads: Interest & full amount paid
Debt factoring
External & long term
Ads: Immediate cash & doesn’t need to handle debt collecting
Disads: Business doesn’t get all the debt
Grants & subsidies
External
Ads: Doesn’t have to be repaid
Disads: Certain conditions to fulfill
Micro-finance
External
Lending small amounts to people in poor countries
Crowdfunding
External
Asking for funds from the public e.g Kickstarter
Overdraft
Short-term
Ads: Cheaper than loans & Flexible
Disads: Periodic interest rate & Bank can ask for repay on short notice
