Sources Of Finance Flashcards
What does loan mean?
A benefit of a loan is that you can pay the money back over 3-5 years. You must have a good credit raining to get a loan and you must pay interest on top of the money you have borrowed.
What does mortgage mean?
You can only get a mortgage for a property. The benefit of a mortgage is that you can paying back over 25 years and the interest rate is very low.
What does sell shares mean?
You can sell shares to raise capital.
A downside is that you no longer own all of your business.
Pound land to float on the Stockmarket. The capital will allow them to double their stores in the U.K.
What does it mean to lease/buy?
Instead of buying an item you could lease it. Many businesses lease cars, buildings, equipment, machinery and even photocopiers.
What does it mean to sell assets?
To raise money you could sell assets such as buildings, cars or equipment. Some businesses such as Tesco have even sold land and rented it back to release capital.
What does retained profit mean?
If you have enough retained profit you can use this capital. A benefit is that you do not need to pay interest. However, you must have made a profit.
What does overdraft mean?
This is a very short term loan. Once it is set up you can access the money whenever you need it. There is an overdraft limit you must stick to.
The source of finance used depends on how long you need the money and what you need the money for.
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