Sources Of Finance Flashcards
How can a business pay?
Bank loans, selling shares, donations, savings
Types of finance
Short term finance
Long term finance
Overdraft
The facility to overspend a current account up to a certain amount.
Trade credit
Paying for supplies a while after receiving them. 30 days to pay it back
Venture capital
An entrepreneur that gives money to a business for a share of the business
Loan
Taking an amount of money that gains interest over an amount of time to pay back.
Shares
Buying/selling an amount of a business
Scenario 1 - David has always dreamt of owning his own car dealership. He currently has £10,000 from savings over the past few years. He will need to purchase cars and look at the different locations to position his business to attract customers.
I think that David should use trade credit to purchase the vehicle because he can easily rise the price of the car when selling to customers to pay back the supplier. For the location he could use a venture capital to get some extra money from another business so there is extra money for a better location which can help attract customers.
Scenario 2- Sarah owns a small nail salon on Maidstone High Street. Her business is popular with locals and has a good customer base. The local hair salon has just closed down and see sees an opportunity to expand her store and add a small salon in store. She currently has £1,000 and would require an additional £3,000 to fund her expansion.
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Scenario 3- Ryan owns a small fishing shop by himself. He tries to cover as many roles without having to pay other people to do it for him to save money. He has just been contacted by HMRC stating that he has not paid enough tax on his earnings last year. He needs to pay £900 within the next 14 days.
I think that Ryan should do some crowd funding. This is because the customers that go to his fishing shop would want his shop to stay open so people would be willing to pay money to pay for the £900 for something from the shop. This would be a good idea because when he has paid the £900 he would’ve only lost a small amount of his stock so he could then rise the prices of his products.
