external sources

Question 1

external sources

Answer 1

sources of money outside the business from others putting money in

Question 2

bank loan

Answer 2

where businesses borrow a lump sum of money that MUST be repaid overtime with interest.

Question 3

bank loan advantages

Answer 3

repayments in instalments
cash flow easier
no issue shares

Question 4

bank loan disadvantages

Answer 4

back up the loan wi9th security

pay back interest

Question 5

overdraft `

Answer 5

pre-arranged money that the business is allowed to use and pay back whenever

Question 6

overdraft advantages

Answer 6

short term funding
flexibility to review funding
covers day to day expenses

Question 7

overdraft disadvantages

Answer 7

interest charged if overdrawn

ended by bank at anytime

Question 8

grants

Answer 8

money that is given by European, national or local government to aid creation of business. DOES NOT have to be paid back.

Question 9

grants advantages

Answer 9

doesn’t have to b e paid back
helps new businesses
creates jobs

Question 10

grants disadvantages

Answer 10

based on application

not available for all businesses

Question 11

venture capital

Answer 11

called an investor, business partner who invests in start up businesses for % share of profits.

Question 12

venture capital advantages

Answer 12

potential large sums of money for investment
expertise help the business
makes it easier to attract other sources of finance

Question 13

venture capital disadvantages

Answer 13

lose % of business 
long and complex process 
expert financial projections required 
risk of conflict 
perceived interference

Question 14

hire purchase

Answer 14

buy an asset and pay it monthly. do not own asset until final payment

Question 15

hire purchase advantages

Answer 15

cheaper than buying outright
manage cash flow
equipment regularly updated

Question 16

hire purchase disadvantages

Answer 16

more expensive in long run

Question 17

trade credit

Answer 17

not immediately paying for stocks. given a certain amount of days to pay

Question 18

trade credit advantages

Answer 18

no interest to be paid

helps cash flow

Question 19

trade credit disadvantages

Answer 19

suppliers might not be willing to provide credit

Question 20

share capital

Answer 20

money paid b y shareholders to become owners of limited company

Question 21

share capital advantages

Answer 21

no interest payed

or repayments

Question 22

share capital disadvantages

Answer 22

shareholders receive part of profits

lose control of business

Question 23

crowdfunding

Answer 23

small amounts of capitals from large number of individuals to finance new business venture. you will give rewards or returns for investments

Question 24

crowdfunding advantages

Answer 24

fast way to raise finance
no upfront fees
good way to test public reaction
alternate finance if you struggle bank loan or other funding

Question 25

crowdfunding disadvantages

Answer 25

lot of work to build up interest
don’t meet funding target the money is returned to funders
can give too much away of business to investor