sources of finance Flashcards
trade credit
when a business buys good from a supplier but pays at a later date
trade credit advantage
can help build a good relationship with the supplier
trade credit disadvantage
can face large fines if credit terms are not met
overdraft
when a business withdraws more money from a bank account than it holds
overdraft advantage
quick and simple to organise
overdraft disadvantage
high interest rates
personal assets
things owned by a person that have value
personal assets advantage
no need to borrow from banks
personal assets disadvantage
risk of losing personal belongings if business fails
loan
when a business borrows money and pays it back with interest over an agreed period of time
loan advantage
frequent repayments can lead to an increased credit score
loan disadvantage
no felxibility - must keep to the terms
government grants
financial award given by government or charities
government grants advantage
no interest
government grants disadvantage
time consuming process - usually the bigger the grant the longer the application takes
venture capital
money invested into a business by venture capitalists who then in return get a share of ownership (equity) and potential future profits
venture capital advantage
large amounts of finance can be raised
venture capital disadvantage
the VC may influence decisions of the business
crowdfunding
Crowdfunding is when a business raises small amounts of money from a large number of people, usually through an online platform.
crowdfunding advantage
Good for new businesses that struggle to get bank loans
crowdfunding disadvantage
No guarantee of reaching the funding goal
new share issues
A new share issue is when a business sells additional shares to investors to raise finance
new share issues advantage
Can raise large amounts of money for expansion
new share issues disadvantage
Profits must be shared through dividends
