Influences in establishing an SME (finance)

Question 1

what is finance

Answer 1

refers to the funds required to carry out the activities of a business.

Question 2

sources of finance

Answer 2

debt and equity

Debt short term:
- overdraft
- commercial bills
- factoring

Debt long term

Question 3

list short and long-term debts

Answer 3

Debt short term: FOC
- overdraft
- commercial bills
- factoring

Debt long term: MUD
- mortgage
- debentures
- unsecured notes

Question 4

what is an overdraft?

Answer 4

a loan provided by a bank that allows a customer to pay for bills and other expenses when the account reaches zero.

it is only for a short period of time and happens when someone needs more money on top of their already existing loan

Question 5

commercial bills?

Question 6

what is factoring?

Answer 6

Where a company issues a percentage decrease to a business who needs to pay them back so it can be paid quicker

Question 7

mortgage

Answer 7

A loan that is used to pay for property

Question 8

debenture

Question 9

unsecured notes

Question 10

Advantages of debt finance

Answer 10

• the owner does not have to sell ownership of the business (shares)
• the owners receive a tax deduction of interest payments

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