external sources of finance: medium term and grants

Question 1

why are medium term and external sources of finance used to obtain and support?

Answer 1

obtain assets and support growth

Question 2

what are the medium term and external sources of finance usually paid for over how long time?

Answer 2

usually paid over a slightly longer period of time

Question 3

hire purchase (HP):
how does an enterprise purchase an asset?

Answer 3

by paying a deposit followed by regular monthly instalments over a
period of time.

Question 4

hire purchase (HP):
when does an enterprise own the asset?

Answer 4

Once the enterprise has paid all the
instalments

Question 5

hire purchase (HP):
how is it a more expensive method?

Answer 5

It is a more expensive method of purchase
than buying the asset with cash at the outset

Question 6

loans:
what are loans?

Answer 6

This is money borrowed by the enterprise at an agreed interest rate

Question 7

loans:
when are loans paid back over?

Answer 7

a period of time, for example 5 or 10 years.

Question 8

loans:
why may loans be used to purchase?

Answer 8

non-current assets such as vehicles, machinery or property

Question 9

loans (advantages):
what happens even if general interest rates increase?

Answer 9

the interest rate is fixed

Question 10

loans (advantages):
why is budgeting easier?

Answer 10

as it is a fixed cost

Question 11

loans (advantages):
what is usually lower than overdraft?

Answer 11

interest rate

Question 12

loans (disadvantages):
what may high interest rates and bank want?

Answer 12

security on the loan

Question 13

loans (disadvantages):
what may lead to bankruptcy?

Answer 13

failure to repay the loans

Question 14

investment from business angels:
why do business angels invest their money in enterprises?

Answer 14

for a minority stake of the enterprise

Question 15

investment from business angels:
what do business angels offer?

Answer 15

ofer mentoring and support to the entrepreneurs

Question 16

investment from business angels (advantages):
what can entrepreneurs access to?

Answer 16

business angel’s knowledge and contacts

Question 17

investment from business angels (advantages):
what do entrepreneurs not pay?

Answer 17

there are no repayments or interest

Question 18

investment from business angels (advantages):
what can be made quickly?

Answer 18

decisions

Question 19

investment from business angels (disadvantages):
what will take a long time?

Answer 19

takes a long time to find a suitable investor

Question 20

investment from business angels (disadvantages):
what does the entrepreneur have to give up?

Answer 20

a share of the enterprise

Question 21

leasing:
what does leasing allow an enterprise to have?

Answer 21

have use of the asset, such as an expensive item of equipment, over a period of time without buying it

Question 22

leasing:
how does the owner of the asset lends it to the enterprise?

Answer 22

for regular payments

Question 23

leasing (advantages):
what can they have without having to pay out a large amount to buy it?

Answer 23

modern equipment

Question 24

leasing (advantages):
what can they have the asset it requires for?

Answer 24

for the time it needs it

Question 25

leasing (advantages):
what is the asset not left with?

Answer 25

with an unwanted asset at the end
of the leasing period

Question 26

leasing (disadvantages):
what does it mean if the enterprise does not own the asset?

Answer 26

it returns the equipment to the owner at the end of the leasing period.

Question 27

peer-to-peer lending (P2P):
what is a P2P?

Answer 27

when small investors invest in an enterprise, usually a start-up, in exchange for a return on their investment.

Question 28

peer-to-peer lending (P2P):
what may it be used by enterprises for?

Answer 28

It may be used by enterprises that could have difficulty getting traditional forms of finance, such as a bank loan

Question 29

peer-to-peer lending (P2P):
what may be higher than traditional types of finance?

Answer 29

interest payments

Question 30

government and charitable grants:
why are local and national government grants used?

Answer 30

to develop the economy

Question 31

government and charitable grants:
why might government and charitable grants be given to certain enterprises?

Answer 31

for example to enable them to create jobs in a particular area

Question 32

government and charitable grants:
what do charitable grants give financial help to?

Answer 32

enterprises in need, usually social enterprises or enterprises whose activities may further the cause of the charity.

Question 33

government and charitable grants:
what do not need to be paid back?

Answer 33

grants

Question 34

government and charitable grants:
who are able to obtain grants?

Answer 34

Only certain enterprises