sources of finance

Question 1

owners equity (sole traders and partnerships only)

Answer 1

money invested by the owner/partner into the business

Question 2

bank loan

Answer 2

money from the bank which has to be repaid with interest over an agrees number of years

Question 3

grant

Answer 3

money received from the Local Council, Government, EU or Lottery for a specific purpose

Question 4

re-invested profits

Answer 4

profit leftover at the end of the year that has not been shared with owner(s)

Question 5

mortgage

Answer 5

a loan specifically for the purchase of property

Question 6

leasing

Answer 6

paying a monthly fee for the use of equipment/vehicles (asset)

Question 7

hire purchase

Answer 7

buying an asset and paying it back over several months (eg 48 or 60 months). an initial down payment is normally required

Question 8

bank overdraft

Answer 8

withdrawing more money from your bank account than you have available

Question 9

trade credit

Answer 9

when goods/materials can be bought from suppliers but are not paid for until a later date (eg 30 days credit)

Question 10

issuing shares (Ltds only)

Answer 10

selling shares to friends and family in return for part-ownership of the company