external Sources Of Finance

Question 1

External sources of finance

Answer 1

• banks
• peer loans
• angel investing
• venture capitalist
• crowdfunding

Question 2

Banks

Answer 2

• may lend a loan to a business to start up/grow
• provide with overdraft to help cash flow problems

Question 3

Benefits of banks

Answer 3

• can get as much money as you want as long as you have something to back it up

Question 4

Drawbacks of banks

Answer 4

• have to pay interest
• if you don’t pay back, then could take assets and shares

Question 5

Peer loans

Answer 5

• unsecured loans a business can access without going through a bank

Question 6

Benefits peer loans

Answer 6

• access money easier than bank loan
• access wide range of finance
• good for start up business

Question 7

Drawbacks peer loans

Answer 7

• if you don’t keep paying back, lenders lose money
• interest higher
• limited application

Question 8

Angel investing

Answer 8

• high net worth individual who provides financial backing for small start ups / entrepreneurs in exchange for ownership equity in company

Question 9

Pro angel investing

Answer 9

• willing to put in lots of money

Question 10

Con angel investors

Answer 10

• no experience / support from angel investors
• have to hand over share of business

Question 11

Ventures capitalist

Answer 11

• a private equity investor that provides capital to companies with high growth potential in exchange for equity stake

Question 12

Pro venture capitalist

Answer 12

• can provide guidance

Question 13

Con venture capitalist

Answer 13

• have to hand over share of business

Question 14

Crowdfunding

Answer 14

• large no. Of people funding a project
• donate- no money back
• lend- money back with interest
• invest- exchange for equity / shares

Question 15

Pro crowdfunding

Answer 15

• no interest

Question 16

Con crowdfunding

Answer 16

• if you don’t get all money you are asking for then you won’t get any
• time period to raise money in