Advantages & Disadvantages Flashcards
What are the advantages and disadvantages of Invoice Discounting
Advantages:
No need to repay
No interest charged
Reduces costs to the business
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Disadvantages:
Often only available if purchases are paid in cash
Negatively impacts cash flow
What are the advantages and disadvantages of Peer to Peer Lending
Advantages:
Interest rate can be lower than traditional bank
Easier to budget as repayments are at a fixed rate
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Disadvantages:
Amount available to borrow may be limited
Short term source
What are the advantages and disadvantages of Donations
Advantages:
No need to repay
No interest charged
No los of ownership or control
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Disadvantages:
Not reliable
Usually received in small amounts
What are the advantages and disadvantages of Grants
Advantages:
Does not need to be repaid
No interest payments
No loss of ownership or control
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Disadvantages:
Have to meet certain conditions
Takes a long time to apply
What are the advantages and disadvantages of Trade Credit
Advantages:
Helps with cash flows due to delayed payments
No los of ownership and control
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Disadvantages:
Lose discounts for paying cash
Short term source of finance
What are the advantages and disadvantages of Leasing
Advantages:
Maintenance and repairs are the responsibility of the supplier
Spreads the cost of the asset rather than paying a lump sum
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Disadvantages:
Likely to cost more than buying outright
Never actually own the assets so the payments are ongoing
What are the advantages and disadvantages of Hire Purchase
Advantages:
Regular payments are good for budgeting
Spreads out the cost of an asset
Avoids paying large lump sum
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Disadvantages:
Likely to cost more than buying the assets outright
Only suitable for lower cost items such as a vein led not land or buildings
What are the advantages and disadvantages of Debt Factoring
Advantages:
Probes the business cash flow
Reduces risk of defaults on payments
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Disadvantages:
Only receive a percentage of the amount he business is owed
Can alienate customers
What are the advantages and disadvantages of Venture Capital
Advantages:
Finance is made available along with advice and mentoring
Finance may be easier to obtain as venture capitalists are usually high risk reward people
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Disadvantages:
Loss of ownership and control
Conflicts may occur over the direction of the business
What are the advantages and disadvantages of Mortgages
Advantages:
Large amounts of finance can be acquired and then repaid over a long period of time
No loss of ownership or control
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Disadvantages:
Interest charged on amount borrowed
Secured against asset that could be seized
Not suitable as a short-term source of finance
What are the advantages and disadvantages of Crowd Funding
Advantages:
No interest paid
Finance is received from a number of investors
Gauges people’s interest in the business
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Disadvantages:
Partial loss of ownership
May not reach your crowd funding target as interest in the business may not be there
Someone could steal you idea from the crowdfunding platform
What are the advantages and disadvantages of Loans
Advantages:
Easy to budget as repayments are prearranged
No loss of ownership
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Disadvantages:
Interest charged
Usually secured against an asset that could be seized if loan is not repaid
Show financial repayments to banks to secure the loan
What are the advantages and disadvantages of Owners Capital
Advantages:
No interest payments
No repayment schedule
No loss of ownership
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Disadvantages:
Limited amount available
Personal finances are at risk
Could cause friction between owners if all are not able to contribute the same amount
