Internal sources of finance Flashcards
internal source of finance
source of finance from within the business
owners funds
money that is put in the business from the private savings of the owners.
advantages
there is no need to pay interest or even repay finance.
retention of ownership by the individual.
disadvantages
amount available may be limited.
puts stress on the day to day finance of the individual.
retained profits
when businesses make profits the owners can decide to spend these on themselves or to use or to expand the business.
bank loan
where the business will borrow a lump sum of money that must be repaid over time with interest.
advantages
repayments in instalments.
makes cash flow easier.
dont have to issue shares.
disadvantages
have to back up the loan with security e.g assets of the business.
pay back interest.
sale of an asset
businesses will sell their posesions that they dont need to buy other investments.
overdraft
a pre-arranged amount of money that the business is allowed to use.
advantages
enable short term funding.
flexibility to review the funding.
covers day to day expenses.
disadvanages
interest charged if overdrawn can be ended by the bank anytime.
grants
an amount of money that is given by either the european national local government, to aid in the creation of the business.
advantages
doesnt have to be paid back
helps start up new business
