5.2 sources of finance

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  • Created on: 04-10-20 15:38
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  • 5.2 sources of finance
    • reasons businesses need finance
      • establishing a new business
      • funding expansion
      • marketing
      • running the business
      • recruitment
    • sources of finance
      • trade credit: a business sells goods after agreeing to pay for them at a later date.
        • adv: business can have goods before paying, no interest is paid on time, can help with cash flow problem.
        • disadv: goods must be paid for even if they don't sell, interest is charged is payment is late.
      • overdraft: a bank makes available to a business more money than they have in their account
        • adv: meets short term cash flow problem, interest only paid on amount owned, repayment is only due when business closes or overdraft isnt needed.
        • disadv: interest charged for every day money is owed which could be expensive.
      • taking on a new partner: the new partner invests some of their savings in the business
        • adv: new partner can bring new skills, no need to repay, no interest.
        • disadv: loss of ownership, partnerships can take on new partners
      • sale of assets: goods etc owned by the business are sold to raise money
        • adv: no need to repay, no interest to pay, good if selling off old stock, equipment.
        • disadv: may be difficult to sell, may take time to sell.
      • loan: a set amount of money, borrowed for a set period of time.
        • adv; repayment is made in fixed sums over a period of time usually monthly, the loan is available immediately after agreement.
        • disadv: interest must be paid, the business may need to give the lender security.
      • retained profit: money not distributed to the owners (shareholder) as profit
        • disadv: business might not have made profits, owners will not get profit as income.
        • adv: no need to repay, no interest to pay
      • share issue: new shares are sold to raise more money
        • disadv: owner loses ownership, shareholders have a say in everything, shares can only be sold by limited companies.
        • adv: ne investors can contribute alot, no need to repay, no interest to pay.
      • owners capitals: the owners savings are invested.
        • disadv: owner risks savings, owner may not have enough savings
        • adv: no need to repay, no interest to pay, doesn't affect ownership and control.
      • crowdfunding: money is donated or invested by sponsors or people invest to become part-owners of the business
        • adv: new supporters can contribute a lot of money to the business through loans, donations, no need to repay, no interest to pay.
        • disadv: interest will be paid if the money is raised through a loan, ownership will be shared if the money is raised through investment.
    • short term: owners capital, sale of assets , trade credit.
    • medium: owners capital, sale of assets, retained profit, bank loan, crowdfunding.
    • long term; owners capital, sale of assets, retained profit, bank loan, crowdfunding, partner, share issue.




Hello everyone, there are a lot of sources for financing in our time, while the most important thing that can and always comes first for every successful businessman is a hard economy. Only with this approach can you achieve success in business. In many cases, you have to make international money transfers, and this is very costly, so in the article at https://fitmymoney.com/international-money-transfers/ you can find information on how to reduce such costs for international money transfers.

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