external sources of finance

Question 1

define external source of finances

Answer 1

investments for the business that is obtained from outside the business

Question 2

list an advantage of family and friends as a source of finance

Answer 2

loans offered without the need for security and at lower rates

Question 3

list an advantage of family and friends as a disadvantage

Answer 3

may cause tension and problems between family members if not paid back

Question 4

list advantages of banks as a source of finance

Answer 4

able to retain control and payment plans are easier to budget and pay back

Question 5

list a disadvantage of bank loans as a source of finance

Answer 5

expensive and the interest must be paid on time
must prepare a business plan

Question 6

define peer funding

Answer 6

matches businesses that need finance with investors

Question 7

list an advantage of peer to peer funding

Answer 7

can get access quickly and can apply online

Question 8

list a disadvantage of peer to peer funding

Answer 8

if not enough people are interested you may not get the full amount

Question 9

define business angles

Answer 9

offers to lend their personal disposable finance in return for shares in the business bringing experience and knowledge

Question 10

list an advantage of a business angel

Answer 10

no repayments or interested
access to mentioning of management skills

Question 11

list a disadvantage of business angels

Answer 11

not suitable for below £10,000 or over £500,000
must give up shares

Question 12

define crowdfunding

Answer 12

a large number of people find a project over the internet making small investments

Question 13

what are the 3 ways to crowdfund?

Answer 13

donate lend and invest

Question 14

list an advantage of crowdfunding

Answer 14

good alternative to a loan finance
no fees
generate funds and promote business at the same time

Question 15

list a disadvantage of crowdfunding

Answer 15

need to showcase your idea using videos and promotional material to attract investors

Question 16

define leasing

Answer 16

when a business grows may needs equipment and vehicles so they lease equipment to update them regularly and spread the cost will never own the equipment but will get the option to change it when it wears out

Question 17

list an advantage of leasing

Answer 17

lower monthly costs
no advanced fees
business always has reliable working equipment

Question 18

list a disadvantage of leasing

Answer 18

over a fixed term
may be difficult to get out of

Question 19

define trade credit

Answer 19

allows a business to purchase stock and pay later this allows the buyer time to sell goods before paying them

Question 20

define an advantage of trade credit

Answer 20

make profit before costs paid
no interest
can secure better deals

Question 21

list a disadvantage of trade credit

Answer 21

not all stock can be bought with trade credit
if not paid back in time they can be refused in the future

Question 22

define grants

Answer 22

government provides financial led to business in effort to overcome unemployment issue

Question 23

do grants have to be repaid

Answer 23

no

Question 24

list an advantage of grants

Answer 24

business owner gets fund without loss of control

Question 25

list a disadvantage of grants

Answer 25

competition
application process can be complex and time consuming