section 2.1 Flashcards
define share capital
investments giving shareholders part ownership in the company with the right to annual dividend payments
define business angels
very early stage investors in share capital, taking huge risks in hope of occasionally finding a huge success
define crowd funding
funding a project or venture by raising money from a large number of people who each contribute a relatively small amount
define venture capital
risk captial invested in the hope of getting a share in future profits
define p2p (peer to peer) lending
where individuals lend to other individuals without prior knowledge of them- on the internet
define bank overdraft
setting a minimum level for a bank balance thats below zero
define unsecrured loan
when lender has no protection if the borrower fails to repay the money owed
define secured loan
when lender requires security to provide protection in case borrow defaults
define external finance
capital/funds raised outside the business
advantages and disadvantages of using family and friends for external finance
advantage- no interest
disadvantage-might not get enough, may be pressure when asking them
what are the 8 types of external finance
-share capital
-family and friends
-venture capital
-overdraft
-bank loans
-p2p lending
-business angels
-crowdfunding
bank loan advantages and disadvantages
advantages- good rates if business is established can get amount needed, provides guidence
disadvantages- paid back with interest
bank over draft advantage and disadvantage
advantage- instant so it improves cash flow
disadvantage- high interest rates (increases risk)
peer to peer lending advantage and disavantages
advantage- higher returns than savings account
disadvantages- high risk if company goes bust, your not covered up to £85,000 linke with banks
venture capital advantages and disadvantages
advantages- advice and finance
disadvantages- loose some ownership of the business
