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Business Finance > External Sources Of Finance > Flashcards

External Sources Of Finance Flashcards

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1
Q

What is a mortgage

A

A legal agreement by which a bank lends money at interest in exchange for taking title of the debtors property

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2
Q

Mortgage advantage

A

Spreads the payment out

Manageable and affordable

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3
Q

Mortgage disadvantage

A

Carrying out debts for a long period of time

Remember to keep paying your repayments

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4
Q

What is hire purchase

A

An agreement whereby a customer agrees to contact to acquire an asset by paying for a set period of time

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5
Q

Hire purchase advantage

A

High spec assets

Low interest on other funding costs

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6
Q

Hire purchase disadvantage

A

Dead money

At the end you don’t own the product

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7
Q

What is owners capital

A

It is the money in the business that owners or shareholders have invested in it

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8
Q

Owners capital advantage

A

The ownership percentage will always stay the same

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9
Q

Owners capital disadvantage

A

Make important company decisions

Could lose control of your business if you sell too much stock

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10
Q

What is a loan

A

A lump sum that you get from the bank and you have to pay back with interest

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11
Q

Loan advantage

A

Easy way of getting money into the business

You can get a big amount

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12
Q

Loan disadvantage

A

Interest is high

If you don’t pay back you can get into a debt cycle

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13
Q

What is crowdfunding

A

This is a way for people to put money into business through websites

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14
Q

Crowdfunding advantage

A

Easy way to get money

Quick to set up

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15
Q

Crowdfunding disadvantage

A

Can take a long time to get a lot of money

Sometimes you might not even get anything

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16
Q

What is venture capital

A

A form of private equity financing it that is provided by venture capital firms of funds to start-ups early-stage and emerging companies

17
Q

Venture capital advantage

A

Easy money
This can help your company to grow quickly
The money is yours to keep

18
Q

Venture capital disadvantage

A

High upfront costs

The investors own stake in the business

19
Q

What is debt factoring

A

A process whereby a business will raise an invoice for work completed passes to a debt factoring provider he will then chase the payment from the debited on behalf of their client

20
Q

Debt factoring advantage

A

Fast way of getting your money

Helps your business to get more income

21
Q

Debt factoring disadvantage

A

Reduce overall profit for business

22
Q

What is leasing

A

This means you pay over a period of time but has high interest and you never own the product

23
Q

Leasing advantage

A

Affordable

Can chose to pay the full amount at the end of the contract

24
Q

Leasing disadvantage

A

You never own the product

The interest and APR could be high

25
Q

What is trade credit

A

A loan extended by one trader to another when the goods and services are bought on credit

26
Q

Trade credit advantage

A

Short-term financing
affordable for the business
There’s not a big sum of money coming out

27
Q

Trade credit disadvantage

A

Fees and penalties
Interest is high
Loss of trade credit privileges

28
Q

What is a grant

A

A sum of money given to business by the government or other companies

29
Q

Grant advantage

A

Easy quick money

Can help your business to compete with other competitors

30
Q

Grant disadvantage

A

Need to do a lot of research before applying for a grant

Success rate is very low

31
Q

What is a donation

A

Money given to the business from the public so they can help the business to meet the aims and objectives

32
Q

Donation advantage

A

How achieve business aims and objectives

Easy quick money

33
Q

Donation disadvantage

A

Might need a lot of money to make an impact

Some donations won’t even be above a pound

34
Q

What is peer-to-peer lending

A

Type of business loan where a large number of private investors learn to a business usually through an online platform

35
Q

Peer-to-peer lending advantage

A

Quick easy money

They normally invest a lot of money

36
Q

Peer-to-peer lending disadvantage

A

They will want the money spent where they want it
They will have an equity percentage in your business
They can pull out any time

37
Q

What is invoice discounting

A

Another type of borrowing against two outstanding invoices and is used to help improve the companies cash flow (loan)

38
Q

Invoice discounting advantage

A

Helps achieve business ambitions

Helps business to grow

39
Q

Invoice discounting disadvantage

A

Have to have an A+ credit rating

Interest

Business Finance (11 decks)

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