Internal sources of finance Flashcards
Internal sources
Sources of money from within the business
Where do internal sources come from?
The owners or previous business income
Owner funds
Money put into the business from private savings or the owners
Advantages of using owners funds
No interest to pay
Retention of ownership by the individual
Disadvantages of using owners funds
Amount available may be limited
Puts stress on finance of individual
Retained profits
When a business makes profit owners can spend it on themselves or to expand and improve the business
Advantages of retained profit
No need to repay
Instantly available
No incur additional costs eg interest
Control isn’t lost
Disadvantages of retained profit
Limited funds may be available
Not an option for a start up business
Sale of an asset
Some business has possessions they don’t need which can be sold off for money for other investments
e.g machinery, land, part of business
