Raising Finance Definitions Flashcards
Loan
Medium to long term, usually from banks. Repayable with interest.
Secured Loan / Moragage
Collateral / specific property asset. Debt less risky for lender.
Personal Sources
Own money acquired by savings, inheritance, selling a business or family member loans.
Hire Purchase
Acquiring non property assets without need for initial cash, just payments.
Business Angel
Formal investments between 10,000 and 600,000. In early start-up usually by wealthy businessmen and entrepreneurs.
Share Capital
Value of the sum invested into the company by shareholders. Cannot get money back by firm, managers can rely on these funds. Referred as Permanent Capital
Trade Credit
Obtaining credit for the purchase of an asset. Deposit and instalments of equal amounts over time. Doesn’t require collateral.
Collateral
Something pledged as security for repayment of a loan, to be forfeited in the event of a default.
Debtor
A person, country, or organization that owes money.
Debt Factoring
Buying debts at a discount. A factor collects a company’s debts when due, and pays the creditor in advance part of the sum to be collected, thus “buying” the debt.
Venture Capitalist
Specialist finance providers that invest in small/risky ventures in return for business ownership/profits.
Government Funding
Activities in the national/public interest, may create jobs in developing areas.
Retained Profit
Money taken after, trading costs, overheads, taxation and dividends deduced from sales revenue. Long term and relatively cheap.
Leasing
Simplest form of external financing, through a cheap and flexible source. Business obtains goods/services from another business.
Sale of Assets
Established business with assets sells, but has the use of the cash. Good business sense to dispose of redundant assets.
