Topic 1.3 - sources of Finances

Question 1

2 short term sources of finances

Answer 1

trade credit
overdrafts

Question 2

6 long term sources of finances

Answer 2

personal savings
venture capital
share capital
loans
retained profit
crowd funding

Question 3

crowd funding

Answer 3

is a way for businesses to raise money from a large number of people, typically through online platforms

Question 4

crowd funding pros and cons

Answer 4

pros - may the only way some businesses can get money
cons - may not attract any other other investors. May be a waste of time which could be used to source funds elsewhere. Alerts competitors to your need for funds

Question 5

personal savings

Answer 5

pros - easy access to the money through the owners bank account, no complicated paperwork. No interest to pay on the money, so cheaper than a loan

Question 6

venture capital

Answer 6

pro - can bring knowledge to the business to help it expand available even to high risk business
con - owners may lose some of the control of the business as they had to give

Question 7

overdrafts

Answer 7

pro - flexible, used to solve a temporary cash-flow problem, interest is only paid on the amount of the overdraft being used rather than the maximum level allowed, security is not usually required.
cons - higher interest loans, banks can demand immediate repayment, bank may refuse to give overdraft.

Question 8

credit loans

Answer 8

pros - can raise significant amount, can be long term, no control is lost
cons - must be paid back, must pay an interest

Question 9

trade credit

Answer 9

pro - the business will never run out of product to sell, The business can sell the first pay the suppliers
con - may charge a higher cost for the product because of the credit arrangement.