External sources

Question 1

What is a bank loan?

Answer 1

Where the business will borrow a lump sum of money that must be repaid over time with interest.

Question 2

Bank loan advantages

Answer 2

.Repayments in instalments
.Makes cash flow easier
.Don’t have to issue shares

Question 3

Bank loan disadvantages

Answer 3

.Have to back up the loan with security e.g assets of the business.
.Pay back interest.

Question 4

What is an overdraft

Answer 4

A pre-arranged amount of money that the business is allowed to use. They can pay it back when it likes.

Question 5

Overdraft advantages

Answer 5

.Enable short term funding
.Flexibility to review the funding
.Covers day to day expenses

Question 6

Overdraft disadvantages

Answer 6

Interest charged if overdrawn, can be ended by the bank at anytime.

Question 7

What is a grant?

Answer 7

An amount of money that is given to a business. This aids the creation of a business. This money does not have to be paid back.

Question 8

Grant advantages

Answer 8

.Doesn’t have to be paid back
.Helps start up a business
.Creates jobs

Question 9

Grant disadvantages

Answer 9

.Based on application

.Not available for all businesses

Question 10

Venture capital advantages

Answer 10

.Potential for large sums of money for investment
.Expertise to help a business
.Makes it easier to attract other sources of finance.

Question 11

Venture capital disadvantages

Answer 11

.Lose a % of profits
.Complex process
.Financial projections are likely required
.Risk of conflict orn perceived interferance.

Question 12

What is venture capital?

Answer 12

A business person who invests into a start-up business for a % share of the profits