SOURCES OF FINANCE Flashcards
1
Q
INTERNAL SOURCES OF FINANCE
A
- personal savings
- retained profit
- selling assets
2
Q
EXTERNAL SOURCES OF FINANCE
A
- bank overdraft
- trade payables / credit
- credit cards
- loan capital
- unsecured bank loans
- mortgages
- debenture
- hire purchase
- share capital
- venture capital
- crowd funding
3
Q
RETAINED PROFIT
A
- profit held by a business rather than returning it to the owners
- may be used in the future
4
Q
SELLING ASSETS
A
- established business may be able to sell some unwanted assets to raise finance
5
Q
BANK OVERDRAFT
A
- business can spend more money than it ha in its account
- bank will set an overdraft limit
- interest is only charged when the account is overdrawn
6
Q
TRADE PAYABLES / CREDIT
A
- business often buy resources and pay for them at a later date
- chap way of raising money
- a business holds on to its cash for longer
7
Q
UNSECURED BANK LOANS
A
- bank lends money
- without the security of having a claim on your assets if you don’t pay back
- business collapses, bank might not get the money back
- interest rates are higher
8
Q
MORTGAGES
A
- long - term loan
- borrower must use land or property as security
- so if the borrower fails to make the repayments
- the lender can repossess the property
- lower interest rates
9
Q
DEBENTURE
A
- long - term sevurity yielding a fixed rate of interest
- issued by a company and secured against assets
- used by public limited companies, PLCs
10
Q
HIRE PURCHASE
A
- long - term and short - term
- buying specific good with a loan
- often provided by a finance house
- buy tools, equipment, vehicles and machinery
11
Q
SHARE CAPITAL / SELLING SHARES
A
- the sale of shares can raise very large amounts of money
12
Q
VENTURE CAPITAL
A
- specialist investors
- provide money for the business purposes
- often to new businesses
13
Q
CROWD FUNDING
A
- where a large number of individuals invest in a business venture
- using an online platform
- therefore avoiding using a bank
