Sources Of Finance ( finish off large firms) Flashcards
What source of finance is given for a small business that never has to be repaid?
Grants- given to qualifying firms that are in areas of high unemployment for example.
What are the two sources of finance for small firm over a short time period?
Trade credit- issue customers with an invoice instead of making them pay upfront.this usually gives then 1-2 months to pay. This is useful because it gives them time to come up with the money.
Overdrafts- banks let the firm take out more money than they currently have. However, they charge interest fees while the account is overdrawn
What are the two long term sources of finance for a small firm?
Loans- either bank loans, loans from friends or family, mortgages.
Venture capital- money lend by individuals or businesses who specialise in giving finance. In return, they often take a stake in the ownership of the business
Why do new and small firms find it hard yo raise finance?
Banks are reluctant because they are a risk and may not b able to repay the loan.
New firms haven’t made much profit yet so they may not have enough money to fund new investments
What are the five reasons why firms need finance?
> start up capital to buy assets needed to run the business
for initial cash flow to pay suppliers
working capital for the day to day running of the firm
for delay payments. Finance is needed to cover shortfall in liquidity
to fund expansion
