Sources of Finance

Question 1

Why do business need finance?

Answer 1

purchase stock,land,store and bills,
advertising
pay staff
expansion
start up
pay back debts
research and development

Question 2

What are some external sources of finance?

Answer 2

government grant, share capital,other businesses,leasing,princes trust, venture capitalist, business angel, bank loan, mortgage, overdraft, peer-to-peer funding, crowdfunding, trade credit,

Question 3

What are some internal sources of finance?

Answer 3

selling assets, retained profit, sale and leaseback, family and friends, owners capital.

Question 4

What is owners capital?
Positives and Negatives?
Internal or external?

Answer 4

personal money that the owner originally has that can be used.
+ easy access, reliable
- no safety net/risk , own money, less secure future
Internal

Question 5

what is retained profit?
Positives and Negatives?
Internal or external?

Answer 5

money that the business can use after the financial year ends
+ reinvestment - growth, improvements, quick
- limited, less wage, less for dividends, unforeseen circumstances can’t be dealt with
Internal

Question 6

what is sale of assets?
Positives and Negatives?
Internal or external?

Answer 6

selling unwanted assets you have on your person that are owned by yourself
+ better to have money, reducing unwanted, leaner
- selling items, reduce inventory, less stock, may need them later

Question 7

what are family and friends?
Positives and Negatives?
Internal or external?

Answer 7

money obtained through close friends and relatives (using the family card)
+ reliable, trust
- trust issues, small sums
Internal

Question 8

what are banks?
Positives and Negatives?
Internal or external?

Answer 8

money loaned out to a business that needs to be repaid after a while
+ advice, large sum, quick, reliable
- interest, ‘blacklisted’ if goes wrong, limited flexibility, may want collateral
External

Question 9

what is peer-to-peer funding?
Positives and Negatives?
Internal or external?

Answer 9

practice of lending money to individuals through online services which usually connects the people willing to negotiate.
+ protected schemes, regulated, simple
- wait, interests
External

Question 10

what is a business angel?
Positives and Negatives?
Internal or external?

Answer 10

individuals that invest money in a company they can also give wisdom and connections for a benefit eg profit percentage
+ ideas, money, connections, growth, mentor,
- less % profit, less control, lose objectives, dilute ownership
External

Question 11

what is crowdfunding?
Positives and Negatives?
Internal or external?

Answer 11

Capital raised via the Internet from a large group with small amounts in return for a sum of money
+ engage community, shows support,
- small scale, only a promise, small sums
External

Question 12

what are other businesses?
Positives and Negatives?
Internal or external?

Answer 12

Businesses willing to help out another business usually supporting them in a short term scenario for a great impact for a better influence over time. eg resources
+ shows faith, money with no interest, connections
- used as a tactic, customers no loyalties, demand exclusivity
External

Question 13

what is a loan?
Positives and Negatives?
Internal or external?

Answer 13

a sum of money from a business in return some money plus interest on the original sum.
+ large sums, shows trust, profitable
- over expand - liability, interest
External

Question 14

what is share capital?
Positives and Negatives?
Internal or external?

Answer 14

selling shares on the stock market the general public fund shares and therefore making money,
+ your choice(ltd), manageable, lots, growth
- selling control, turnover, original shareholders upset
Internal

Question 15

what is venture capital?
Positives and Negatives?
Internal or external?

Answer 15

risk taker that invests into a failing but potentially CASHCOW business but expects large equity.
+ connections, your money, ideas, scheme to follow
- control, profit, changed goals
External

Question 16

what is a overdraft?
Positives and Negatives?
Internal or external?

Answer 16

going beyond the limit on a card and spending more money they don’t have paid back + taxes
+ less paperwork, flexibility, safety net, handy when big sum for short term
- interest rates, spiral out of control, bad credit scores.
External, must be agreed upon with bank, not sustainable

Question 17

what is leasing
Positives and Negatives?
Internal or external?

Answer 17

paying in intervals to purchase equipment or assets to make payment sustainable over time
+ less expensive, still use equipment, own, cheaper, good for cash flow forecasts
- buying utilities, responsible, more expensive over time,
External

Question 18

what is trade credit?
Positives and Negatives?
Internal or external?

Answer 18

asking suppliers to delay payment over time so businesses can gain finance and then carry on.
+ more time, customer loyalty, trust, just-in-time
- supplier issues, unreliability, downtime of no profits
External

Question 19

what is a grant?
Positives and Negatives?
Internal or external?

Answer 19

money donated from the government that is solely to fund themselves with no drawbacks.
+ quick decision, no interest, no control issues, free money, security
- difficult, competition, rules, must meet certain requirements
External

Question 20

What sources of finance are used by start-ups/small businesses?

Answer 20

owners capital, sales assets, family friends, peer to peer funding, crowd funding, loans, overdrafts, trade credit, grants, venture capitalists,

Question 21

What sources of finance are used by medium sized businesses?

Answer 21

owners capital, retained profit, business angels, other businesses,

Question 22

What sources of finance are used by large companies?

Answer 22

retained profits, share capital, other businesses