7.2 Sources Of Finance

Question 1

Bank loans, A/D ?

Answer 1

Borrowing money from the bank and paying it back in time.

Advantages :
- borrow as much as you want
- bank does not own any part of your business
- spread payment over a number of years
- quick method to get money

Disadvantages:
- not paid back in time you will have to pay interest
- bad credit score can be used against you

Question 2

Savings, A/D ?

Answer 2

Personal savings is saving your own money through numerous years

Advantages :
- no interest
- do not have to pay it back

Disadvantages:
- time consuming

Question 3

Credit card, A/D ?

Answer 3

Borrowing money form your bank

Advantages :
- if you don’t have enough money you can still pay for things
- instant
- increase cred score

Disadvantages:
- interest if not paid back in time

Question 4

Venture capitalist, A/D ?

Answer 4

Entrepreneur who invests capital into the business for a percentage of ownership

Advantages :
- large amounts of money
- they can provide expert knowledge

Disadvantages :
- part of control in decision making
- pay dividends (share of your profits)

Question 5

Share issue, A/D ?

Answer 5

This is where you sell part of your company in a form of a share that anyone can invest in.

Advantages :
- wide range of investments
- large sums of money

Disadvantage :
- time consuming
- loss of part of business and profits

Question 6

Crowdfunding, A/D ?

Answer 6

Where general public donate money to riskier business ideas

Advantages :
- don’t have to pay back
- can help risky business ideas

Disadvantage :
- not guaranteed money
- if you don’t reach target you have to give money back

Question 7

Reserves, A/D ?

Answer 7

Money made from profits

Advantages :
- no interest
- don’t have to pay back anyone

Disadvantages :
- time consuming

Question 8

Overdraft, A/D ?

Answer 8

Money borrows form bank once you gone under 0

Advantage :
- don’t have money you can still pay
- instantaneous

Disadvantages :
- interest
- can affect credit score

Question 9

Mortgage, A/D ?

Answer 9

Large amount of money borrows to buy a property

Advantages :
- can be paid over many years
- large amount of money

Disadvantages :
- interest
- not instant

Question 10

Hire purchase, A/D ?

Answer 10

When you borrow money to buy an asset

Advantages :
- pay overtime (long term)
- get to use asset until it’s purchased

Disadvantages :
- interest
- if you can’t afford it it will be taken away

Question 11

Trade credit, A/D ?

Answer 11

When your supplier gives you an advancement j your supplies and expect payment

Advantage :
- loan you can start your business
- helps with cash flow

Disadvantage :
- if not paid you can break relationship w supplier
- late payment fee