sources of finance Flashcards
Short-term finance
Used to help a business maintain a positive cash flow.
Example of short-term finance
Bridge the gap when a large payment is delayed, leaving the business without enough money to pay its bills.
Overdraft
An agreement with the bank to overspend on an account.
Common features of a bank overdraft
Variable interest rates, flexibility, the bank can demand full payment
Trade credit
The ability to buy stock now and pay for it later date.
Common terms and conditions of a credit agreement
Credit limit, credit period, frequency of payment, method of payment and retrospective discount.
Personal savings
The money that has been saved up by an entrepreneur.
Venture capital
The money invested by an individual or group that is willing to take the risk of funding a new business in exchange for an agreed share of the profits.
Share capital
The money raised by shareholders through the sale of ordinary shares.
Ad and dis of a share capital
A ad is that Share capital is a source of permanent capital. A dis is that the business is vulnerable to takeover.
Bank loan
Is the money lent to an individual or business that is paid off with interest over an agreed period of time.
Retained profit
When a business makes a profit.
Crowdfunding
A large number of people investing small amounts of money in a business.
Ad and dis of crowdfunding
A ad is that it acts as a form of market research. A dis is that it can be difficult to reach the funding target.
