Business Plan

Question 1

what’s a credit card? LONG TERM, EXTERNAL
-give 2 advantages and disadvantages

Answer 1

borrowing money from the bank that you have to pay back
Advantages: can spend money you don’t have, wait up to 7 weeks to pay it off
Disadvantages: getting into debt, credit core can go down

Question 2

what’s a hire purchase? MEDIUM - LONG TERM, EXTERNAL
-give 2 advantages and disadvantages

Answer 2

buy now pay later (Klarna)
Advantages: flexible repayment terms, budget-friendly payments
Disadvantages: costs more in the long run, no ownership until payed off

Question 3

what’s a venture capatilist? LONG TERM, EXTERNAL
-give 2 advantages and disadvantages

Answer 3

a peron who makes capital investments in companies in exchange for an equity stake
Advantages: networking opportunities, validation
Disadvantages: highly competitive, dilution of ownership

Question 4

what is trade credit? SHORT TERM, EXTERNAL
-give 2 advantages and disadvantages

Answer 4

short-term financing agreement in which your allowed to buy goods or services from another business and pay for them at a later date
Advantages: flexibility in payment terms and opportunity for discounts
Disadvantages: interest costs and potential strain on relationships

Question 5

what’s a share issue? LONG TERM, EXTERNAL and INTERNAL
-give 2 advantages and disadvantages

Answer 5

a procedure where companies pass on new shares to new existing shareholders
Advantages: finance raised doesn’t need to be paid back and large amounts of finance can be raised
Disadvantages: shareholders need to be paid a dividend each year and shareholders become part owners of the business

Question 6

what is crowd-funding? LONG TERM
-give 2 advantages and disadvantages

Answer 6

getting small amounts of finance from a large amount of people
Advantages: access to large amounts of investors and fast way to raise finance
Disadvantages: a public request for investment risks your project being copied by competitors and if the targeted amount isn’t reached the money is then returned to investors and the business gets nothing

Question 7

what’s a loan? LONG TERM
-give 2 advantages and disadvantages

Answer 7

where you borrow a specified amount of money and you have to pay it back with interest
Advantages: easy and quick to access and can get a significant amount of money at one time
Disadvantages: have to pay interest and it’s difficult for a new business to access

Question 8

what are savings? LONG TERM, INTERNAL
-give 2 advantages and disadvantages

Answer 8

the proportion of income not spent on current expenditures
Advantages: earn interest and its a safest investment option
Disadvantages: interest rates can change and there easy to access

Question 9

what are reserves? SHORT TERM
-give 2 advantages and disadvantages

Answer 9

proportions of a business’s profits which have been set aside to strengthen the business’s financial position
Advantages: dips in revenue and unpaid invoices
Disadvantages: misuse of funds and limited liquidity

Question 10

what’s a mortgage? LONG TERM, EXTERNAL
-give 2 advantages and disadvantages

Answer 10

a type of long term loan you can use to help buy a house or another type of property
Advantages: capital gains and renting potential
Disadvantages: raising a deposit and property maintenance

Question 11

what’s an overdraft? SHORT TERM, EXTERNAL
-give 2 advantages and disadvantages

Answer 11

allows you to withdraw more money from your bank account than available
Advantages: quick to access and allows emergency purchase
Disadvantages: high interest rates and is only a short term solution