Raising Finance Flashcards
What are the benefits of a bank loan?
Long time to pay back
Low interest
What are the drawbacks of a back loan?
Interest to pay
Unlimited liability
What are the benefits of an overdraft?
Flexible
Help cash flow
What are the drawbacks of an overdraft
High intrest
What is a business angel?
An individuals who use their personal wealth to provide capital to start-up and early-stage businesses in return for a share of the company’s equity.
What are the benefits of a business angel?
Give knowledge & contacts
No repayment
What are the drawbacks of a business angel?
Hard to find
Loss of control
What are the benefits of crowdfunding?
No repayment
No intrest
What are the drawbacks of crowdfunding?
Take a while to raise money
Must reach target
What are the drawbacks of raising money through family/friends?
Hard to persuade
Personal fall out
What are the advantages of using share capital?
Large amount raised
Gain money world wide
What are the disadvantages of using share capital?
loss of control
Could be taken over
What is a venture capitalist?
An individual who invests in a business in return for a % of the business ownership
What are the benefits of a venture capitalist?
Gain knowledge/contacts
Advice given
What are the drawbacks of a venture capitalist?
loss of control
Investor has control
Benefits of leasing?
Helps with budgeting
Drawbacks of leasing?
Don’t own equipment
Puts pressure on outflows
Benefits of trade credit?
Slows down outflows
Less likely to go bankrupt
Drawbacks of trade credit?
Unethical
hard to get for small companies
Benefits of grants?
Reduce unemployment
No repayments
Drawbacks of grants?
Only accessed by companies that are ethical
What is the calculation for opening balance?
Last months closing balance
What is the calculation for closing balance?
Opening balance + NCF
What is the calculation for NCF?
Inflows - Outflows
Examples of Inflows? (6)
Sales revenue Receivables (debetors) Loans Share capital Intrest Business angel/venture capitalist
Examples of outflows? (6)
Payables (Creditors) Utilities wages mantensie Rent Corporation tax
What happens if a company over invests in fixed assests?
Too many/too high outflows
What happens if a business has too much stock?
Too many/too high outflows
What happens if a business gives customers too much trade credit?
Slows down inflows
What does seasonal demand do to a business?
Fluctuates inflows & outflows
What happens if a business over trades too quickly (grows)?
Unmatched inflows & outflows
What is a cash flow forecast?
A document that predicts the cash flowing into the business and out of the business
