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Business Theme 2 > Edexcel-External finance > Flashcards

Edexcel-External finance Flashcards

1
Q

External

A

Sourced outside the business

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2
Q

Family and friends

A

Small businesses approach close acquaintances to invest or lend money.

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3
Q

Family and friends advantages

A

Cheap source
Beneficial for both if it’s just a share of business

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4
Q

Family and friends disadvantages

A

Relationships may be damaged

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5
Q

Banks

A

Provide several type of loans

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6
Q

short term loans and finances examples

A

Overdrafts

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7
Q

Long term loans and finances examples

A

Loans or mortgages

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8
Q

Banks advantages

A

Can provide free advice
Can offer both short and long time finances

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9
Q

Banks disadvantages

A

Interest is added
A plan is usually required

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10
Q

Peer to peer funding

A

Individuals with available savings pool it in with others in a peer investment scheme.

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11
Q

Peer to peer funding advantages

A

Loans made quickly
Share of business is good as no strings attached

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12
Q

Peer to peer funding disadvantages

A

Charged small fee and interest as compensation

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13
Q

Business Angels

A

Some individuals specialise in making investments in start-up or expanding businesses

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14
Q

Business Angels examples

A

Dragons Den investors

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15
Q

Business Angels advantages

A

Tend to be more willing to take a risk
Owners regain shares in the future

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16
Q

Business Angels disadvantages

A

Finding the right angel with experience can be difficult
Involved in decision making

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17
Q

Crowd Funding

A

Allows businesses to access finance provided by a large number of small investors on online platforms

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18
Q

Crowd Funding e.g.

A

Kickstarter

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19
Q

Crowd Funding advantages

A

Provides a form of free marketing
A good credit score is not required so new businesses can get the funding

20
Q

Crowd Funding disadvantages

A

Persuasive business plan needed to beat competitors
Potential negative reputation if business can’t attract crowd funding.

21
Q

Example

A

Russ Jones published book early and this attracted businesses, used unibound

22
Q

Other businesses

A

Joint ventures with other businesses
Large businesses buy shares

23
Q

Other businesses examples

A

Owner of sports direct bought shares of debenhams and eventually took over

24
Q

Other businesses advantages

A

Access business and market knowledge
Access Large amounts of finance

25
Q

Other businesses disadvantages

A

Profits need to be shared
Decisions need to be agreed by all businesses

26
Q

Loans

A

A sum of money borrowed and repaid with interest.

27
Q

Loans advantages

A

Interest rates are fixed
Repayments made in equal instalments

28
Q

Loans disadvantages

A

Interest rates depend on credit rating
Liabilities are increased on balance sheet.

29
Q

Examples of loans

A

Mortgages
Debentures

30
Q

Overdrafts

A

Arrangement to spend more money than in the account

31
Q

Overdrafts advantages

A

Aids cash flow
Offers flexibility

32
Q

Overdrafts disadvantages

A

May be cancelled
still have to pay fee of interest

33
Q

Share capital

A

Finance raised from the sale of shares

34
Q

Share capital advantages

A

Large amounts of capital raised
Interest not payable

35
Q

Share capital disadvantages

A

Share holder involved in decisions

36
Q

Venture capital

A

Funds provided by specialist investor

37
Q

Venture capital advantages

A

Easy way to attract investments

38
Q

Venture capital disadvantages

A

Usually require a stake in the business and have some control

39
Q

Leasing

A

Regular payments for equipment

40
Q

Leasing advantages

A

Business does not own the asset

41
Q

Leasing disadvantages

A

More expensive in the long run

42
Q

Trade credit

A

Agreement to buy stock which are paid at a later date

43
Q

Trade credit advantages

A

Interest free

44
Q

Trade credit disadvantages

A

Discounts not available

45
Q

Grants

A

Governments and trusts may offer grants

46
Q

Grants advantages

A

Grants do not need to be repaid

47
Q

Grants disadvantages

A

Businesses have to use finances for intended purpouse

Business Theme 2 (10 decks)

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